Pricing, Metering, and Default Service Reform Paul Gromer Peregrine Energy Group

1. Pricing, Metering, and Default Service Reform Paul Gromer Peregrine Energy Group

2. Pricing and Metering Working Group • Recommendations developed by working group. • Working group ably supported by NEDRI consultants Rick Weston and Jim Lazar. • Working group included representatives of: • Metering companies • Utilities • Regulators • Low income customer advocates • Competitive retail suppliers • Environmental advocates • Demand response providers

3. A series of collegial meetings

4. And one on one discussions

5. Producing a happy consensus

6. Issues • “It’s the price, stupid.” • In most markets, customers don’t get paid not to use. Instead, they pay the full cost of what they do use. • The evidence is that electric customers do respond to price signals. • Just like all other customers. • However, flat, fixed prices are the norm in the industry. Those prices create no incentive to shift load. • “No, it’s the meter, you moron.” • You can’t price what you don’t meter. • Dumb, kWh meters do not support anything but flat, fixed prices. • “No, it’s the cost, idiot.” • I’m not paying for all those fancy new meters. • “No, it’s the politics, you bozo.” • I’m not instituting time of use rates for default customers. My predecessor did that. That’s why I’m here and he’s not.

7. Strategy Set One: Improving pricing for customers to allow price-induced DR • PM-1: PUCs should investigate time-sensitive pricing for default service customers • PUCs should bite the bullet and take a hard look at this. • Pricing may vary by customer size and by availability of metering • Options to consider include: • Real-time pricing • Critical peak pricing • Inverted block rates

8. Strategy Set Two: Support Demand Response in the mass market • PM-2A: PUCs should investigate wide scale deployment of advanced meters for mass market customers, and the associated rate designs those meters would enable. • Investigations should examine: • Costs • Benefits (including, but not limited to, demand response benefits) • Metering deployment options • Method of deployment has a big impact on cost • Answers will be state specific • NEDRI offers a protocol for these investigations

9. Strategy Set Two (cont.) • PM-2B: For customer classes for which advanced metering is not cost effective, utilities should conduct load research, and establish load profiles to support DR without new meters. • PM-2C: Target efficiency to peak load uses

10. Strategy Set Three: Cross-cutting Efforts • PM-3A: Price default service to cover all relevant costs • Premise: Competitive retail suppliers are better suited to provide DR services to customers than are utility default service providers. • NEDRI consensus regarding large customers; differing views regarding small. • Default service pricing that covers all relevant costs will encourage customer migration to competitive suppliers, which in turn will foster demand response.

11. Strategy Set Three cont. • PM-3B: Share DR revenues between customers and utility DR providers to ensure adequate “headroom” for independent DR providers. • PM-3C: Remove distribution company disincentives to deliver aggressive DR programs. • Mechanisms could include incentives, lost revenue adjustments, revenue capped PBR.