From Throughput to Access Fees: The Future of Network and Retail Tariffs

Abstract

This chapter critically evaluates how utilities will need to adjust their tariff structures to compete with new forms of energy production. The structure of these tariffs will be a critical determinant of the success or failure of utilities in the future. The authors assess existing and emerging tariff designs to address the advent of grid-connected substitutes such as distributed generation. The economic efficiency and equity implications of changing tariff designs are assessed based on existing and emerging technologies. The chapter concludes that utilities must be cautious in rapidly redesigning their business models or rebalancing their tariffs, as they attempt to recover revenue previously obtained through rising volumetric consumption. Importantly, adjusting tariffs to recover revenues in the short term may hasten the adoption of energy storage technologies, further undermining the financial stability of utilities in the long term.