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Aligning Utility Shareholder and Consumer Interests
Rate Alerts: A Monthly Summary of State Rate Decisions
Rate Roundup: A Periodic Update on Innovative Rate Designs
Meeting and Presentation Materials
Rate Cases
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Non-Volumetric Rates and Cost Trackers Update (September 2012)

 Aligning Utility Shareholder and Consumer Interests 

There are three rate designs in common usage by natural gas utilities to separate the recovery of commission authorized revenues from the energy consumption of customers.  These are decoupling, flat monthly delivery service fee (also known as straight fixed variable), and rate stabilization.  Nearly one half of the 65 million residential customers in the US are currently receiving natural gas service under one of these three rate designs.

 

 Revenue decoupling

Decoupling works by making periodic true-up adjustments to the “coupled” rate design to ensure that a utility’s authorized revenues are not adversely affected by customers’ energy efficiency measures.  Customers continue to pay delivery service rates that are proportional to their energy usage.  Customer energy usage is billed on consumption and all savings from reduced energy consumption flow to the customer.  28 utilities in 16 states are serving 20 million residential customers under decoupled rates.

Progress on Adoption of Revenue Decoupling by State and Other Resources

 

FLAT MONTHLY FEE (sfv)

Flat monthly delivery service fee is perhaps the easiest to understand.  All of the utility’s costs except the costs of the natural gas consumed by customers are billed and recovered in a flat monthly fee.  Costs for consumption of natural gas are billed and recovered separately.  This “separates the fixed cost revenue recovery from the volume of energy provided to customers”.  All customers within the same rate class, i.e., residential customers, pay the same flat delivery service fee.  Customer energy usage is billed on consumption and all savings from reduced energy consumption flow to the customer.  9 utilities in 5 states serve 6 million residential customers using one of several types of flat monthly fee rate designs.

Progess on Adoption of Flat Monthly Fee by State and Other Resources

 

rate stabilization

Rate stabilization is decoupling with an additional component.  Some states allow utilities to track expenses and pass through in rates commission approved changes in expenses.  When a utility has both a revenue true-up and an expense pass through mechanism, the rate design is called rate stabilization.  Customers continue to pay delivery service rates that are proportional to their energy usage.  Customer energy usage is billed on consumption and all savings from reduced energy consumption flow to the customer.  5 million residential customers in 6 states receive service from 12 utilities using rate stabilization tariffs.

Progress on Adoption of Rate Stabilization by State and Other Resources

 

 

 

 

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