CEA Utility Rate Structures & Tariffs 5 — Questions and Answers
Question 1: Under a seasonal time-of-use (TOU) rate, a food processing plant plans a major equipment test run. From a tariff management perspective, what is the most cost-effective timing?
- Summer on-peak weekday afternoons when production aligns with demand
- Winter off-peak weekend nights when both energy and demand rates are lowest (Correct answer)
- Summer off-peak mornings to avoid demand ratchet triggers
- Anytime, because TOU rates only affect residential customers
Correct answer: Winter off-peak weekend nights when both energy and demand rates are lowest
Running equipment during winter off-peak weekend nights minimizes both the energy charge (lowest TOU tier) and avoids setting a high peak demand during the costliest billing window.
Question 2: What is the primary risk that utilities cite when opposing full retail-rate net metering for rooftop solar customers?
- Solar customers consume too much reactive power
- Non-solar customers cross-subsidize solar customers who still use the grid but don't pay their full share of fixed costs (Correct answer)
- Solar generation creates frequency instability during peak demand
- Net metering increases fuel adjustment clause costs for all customers
Correct answer: Non-solar customers cross-subsidize solar customers who still use the grid but don't pay their full share of fixed costs
Utilities argue that solar customers who offset kWh but still rely on the grid at night shift fixed cost recovery to non-solar customers who pay full volumetric rates.
Question 3: A CEA is evaluating a customer's bill under a three-part tariff: fixed customer charge, non-coincident peak demand charge, and volumetric energy charge. Which component would battery energy storage (BESS) most directly reduce?
- Customer charge
- Non-coincident peak demand charge (Correct answer)
- Volumetric energy charge during off-peak hours
- Fuel adjustment clause component
Correct answer: Non-coincident peak demand charge
BESS is charged during off-peak periods and discharged during peak intervals to shave the customer's measured 15-minute peak demand, directly reducing the demand charge.
Question 4: What is a 'demand response' (DR) rider or tariff, and what does a customer receive for participating?
- A penalty surcharge for customers who exceed their contracted demand during emergencies
- A bill credit or rate reduction in exchange for agreeing to reduce load when the utility calls a DR event (Correct answer)
- A fixed subscription to firm capacity rights during grid emergencies
- A volumetric rate reduction for customers who install smart meters
Correct answer: A bill credit or rate reduction in exchange for agreeing to reduce load when the utility calls a DR event
Demand response programs pay customers (via bill credits, rate discounts, or direct payments) to reduce load during grid stress events, providing the utility with a dispatchable demand reduction resource.
Question 5: In utility rate design, what does 'rate base' refer to, and why is it relevant to tariff levels?
- The base volumetric energy rate before adjustments
- The value of utility assets on which regulators allow the utility to earn a regulated return, which drives revenue requirement and tariff levels (Correct answer)
- The minimum monthly bill charged to all customer classes
- The baseline energy consumption used to calculate TOU demand charges
Correct answer: The value of utility assets on which regulators allow the utility to earn a regulated return, which drives revenue requirement and tariff levels
Rate base represents the net investment in utility assets; multiplying it by the allowed rate of return is a key component of the utility's revenue requirement, which tariffs must recover.
Question 6: A utility offers a 'time-varying transmission' charge that is highest during the five coincident peak hours of the year. What is the most effective strategy for a large C&I customer to minimize this charge?
- Reduce total annual kWh consumption by 10% through LED retrofits
- Accurately predict and curtail load during those specific five peak hours each year (Correct answer)
- Install power factor correction equipment to reduce reactive demand
- Switch to interruptible gas service to lower total energy costs
Correct answer: Accurately predict and curtail load during those specific five peak hours each year
Transmission coincident peak charges are incurred only during the handful of system peak hours; customers who successfully curtail during those hours can dramatically reduce their transmission cost allocation.
Question 7: A utility's tariff book includes Schedule GS-TOU (General Service Time-of-Use) and Schedule GS (General Service flat rate). A customer's facility operates 24/7 with very flat load. Which schedule is likely more cost-effective and why?
- GS-TOU, because flat load means low peak demand charges under TOU
- GS flat rate, because 24/7 operations mean the customer cannot avoid on-peak hours under TOU
- GS-TOU, because 24/7 operations earn an off-peak credit on all nighttime consumption (Correct answer)
- GS flat rate only if the customer's power factor exceeds 0.95
Correct answer: GS-TOU, because 24/7 operations earn an off-peak credit on all nighttime consumption
A 24/7 flat load means substantial consumption during cheaper off-peak and overnight TOU hours; the customer benefits from lower off-peak rates while also consuming during on-peak hours at a higher rate, but the net effect often favors TOU when off-peak consumption dominates.
CEA Utility Rate Structures & Tariffs 5
Under a seasonal time-of-use (TOU) rate, a food processing plant plans a major equipment test run.
From a tariff management perspective, what is the most cost-effective timing?