Advanced Rate Design + Cost of Service

Current Energy Group experts analyze and develop traditional and modern cost of service models, rate designs, and customer-focused programs.

Cost modeling and rate design can be a complex space with many diverse perspectives supporting different approaches.

Current Energy Group conducts objective cost and rate analysis with the aim to minimize power system costs while achieving public policy goals.

Utility energy systems serve a vast number and variety of customers with predominantly shared resources to deliver energy services. An even greater number of options exist for assigning cost responsibility and recovering costs from those customers for shared resources. While commonly accepted standards have existed for many years, the power system and associated technologies are changing in ways that require rethinking traditional rates and programs to minimize future costs for ratepayers.

Service Offerings

Rate Design

Good rate design accomplishes three goals: it sends customers an efficient price signal, advances policy goals, and accurately reflects the cost of serving different customer classes. CEG evaluates rate design proposals against all three objectives, analyzing the cost and revenue impacts of different rate model options. CEG’s capabilities include analysis of the impact of electrification, load shifting and flexibility, time-of-use rates, distributed energy resources (DER), export tariffs, and more.

Our experts ground assessments in temporal cost and usage data, testing whether proposed rates actually reflect the costs each class imposes. That means scrutinizing the revenue proof and its assumptions, eligibility requirements, and the calculation behind each rate component, and then modeling bill and revenue impacts across a range of scenarios, from DER adoption to export policy changes.

CEG evaluates utility rate design proposals with a focus on:

• Cost Basis: whether the design rests on an accurate revenue requirement and sound underlying cost of service analysis
• Fairness: whether individual rate components, like the fixed charge, are cost-based and how they land on low-usage and low-income customers
• Efficiency: whether the price signal helps customers make consumption and investment decisions that lower their bills and reduce long-run system costs
• Policy Alignment: whether the design efficiently advances goals like electrification and energy efficiency

Cost of Service

How and when customers use energy impacts the cost of serving them, and this impact is growing as utilities decarbonize. Cost of Service studies analyze this relationship, dividing a utility’s revenue requirement among customer classes based on how each class actually drives system costs. Many of the functionalization, classification, and allocation methods still in use were developed decades ago, often before Advanced Metering Infrastructure, distributed energy resources, and battery storage existed, making it essential to modernize Cost of Service methodology for today’s utility.

CEG brings deep expertise evaluating the full range of cost of service methodologies, including both Embedded (ECOSS) and Marginal (MCOSS) approaches, for power and water utilities alike. We help clients see past the mechanics of any one model to understand why different methods produce different results, and which one most accurately reflects each class’s real contribution to system costs.

CEG evaluates cost of service studies with a focus on:

• Methodological Framework: whether functionalization, classification, and allocation methods, and their underlying assumptions, reflect today’s grid and today’s consumer
• Cost Causation: whether the model captures both the how and the whenof customer energy use
• Cross-Class Equity: whether the allocation methodology shifts costs inappropriately between customer classes
• Revenue Apportionment: whether the final allocation reasonably balances cost causation against rate design principles like gradualism and rate shock avoidance