Moving Toward Demand-Based Residential Rates

The widespread use of automated metering infrastructure in the electricity distribution industry is generating increasing discussion of residential demand charges. An analysis of six types of residential rate designs shows that designing residential rates with seasonal consumption charges might make significant progress toward a more efficient rate design. Seasonal usage rates are understandable to customers, avoid many of the problems with demand-based rates, do not require significant implementation expenditures, and may avoid the extreme bill impacts of some demand-based rate options.