184 Innovative Rate Types

Utilities have designed a variety of rate types to accomplish different goals. Some influence the customer to use more or less energy or use energy at times that are helpful to the utility. Others are designed to retain or attract customers. Still others are designed to encourage efficient use of energy. The following are some of the innovative rate types that customers should know about.

Time-of-Use Rates are used for the pricing of electricity only. The primary purpose of the time-of-use (TOU) rate is to send the proper pricing signals to the consumer regarding the cost of energy during specific times of the day. Generally, a utility's daytime load is higher than its nighttime load, resulting in higher daytime pro duction costs. Proper TOU price signals will encourage customers to defer energy use until costs are lower. TOU rates are usually offered as options to customers, though some utilities have mandatory TOU rates.

End-Use Rates, these rates include air-conditioning, all-electric, compressed natural gas, multi-family, space-heating, thermal energy storage, vehicle fuel and water-heating rates. These rates are all intended to encourage customers to use energy for a specific end-use.

Financial Incentive Rates include rates such as residential assistance, displacement, economic development, and surplus power rates. Assistance rates provide discounts to residential customers who meet specific low-income levels, are senior citizens or suffer from some physical disability. Displacement rates are offered by electric utilities to customers who are capable of generating their own electricity. The price offered to these customers for utility-provided power is intended to induce the customer to "displace" its own generated electricity with utility-provided electricity. Economic development rates are generally offered by utilities to provide economic incentives for businesses to remain, locate, or expand into areas which are economically distressed. This type of rate is an attempt to attract new customers into the area and to get existing customers to expand until the area is revitalized. Surplus power rates are offered to large commercial and industrial customers. They are offered gas or electric capacity at greatly reduced prices when the utility has an excess available for sale.

Interruptible Rates generally apply to commercial and industrial customers. The utilities often offer several options with respect to the customer's ability to interrupt. Prices vary based on the amount of capacity that is interruptible, the length of the interruption, and the notification time before interruption. Such interruptions are generally, but not always, customer controlled. In addition, the total number of interruptions and the maximum annual hours of interruption may be limited.

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