Retail rate design in the US: time-varying rates for residential customers

Ahmad Faruqui and Ziyi Tang

Chapter Chapter 10 in Handbook on Electricity Regulation, 2025, pp 231-253 from Edward Elgar Publishing

Abstract: In the 1960s, US electric tariffs were almost entirely volumetric, expressed in cents per kWh. After the first oil shock, federal legislation made energy conservation a priority. Sixteen pilots with time-of-use (TOU) rates were carried out. In 2000-01, California’s energy crisis triggered a second generation of TOU pilots. Simultaneously, smart meters began to be rolled out. In 2022, 9.4% of all US households were on TOU rates. That number may rise to 25-35% by 2030. This chapter reviews how “Time-Varying Rates” (TVR) evolved in the US over the past decades and how they are likely to evolve to meet the challenges of the transition to Net Zero. It concludes that, for decades TVR stayed as an “exotic service offering” but the new technological wave of PV, EVs and HPs will push more utilities to consider and offer TVR. Regulators may even make TVR the “default option.”

Keywords: Tariffs; Rate design; Pricing; Time-varying rates (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035314348
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