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Traditional utility business models and regulatory frameworks were built on the assumption that the utility would act as the “sole source provider” of electricity to meet the demands of customers across its entire service territory. Though their impacts vary based on location, Distributed Energy Resources (DERs) are rapidly changing this as a given. This changing landscape has placed utilities and regulators in unchartered territory.

In response to the increased penetration of DERs and associated issues, the National Association of Regulatory Utility Commissioners (NARUC) created a Staff Subcommittee on Rate Design tasked with “creating a practical set of tools…for regulators who have to grapple with the complicated issues of rate design for distributed generation and other purposes.” In November, NARUC released the subcommittee’s final report titled Distributed Energy Resources Rate Design and Compensation. The purpose of this report is to:

  • Assist jurisdictions in identifying issues related to DERs
  • Assist jurisdictions in developing policies related to DER compensation
  • Assist regulators in answering DER-related questions in a way that is most appropriate for its jurisdiction
  • Provide regulators with possible options that a jurisdiction may want to consider and adopt
  • Provide a snapshot of options available today and discuss the role advanced technology will play in the future to assist regulators in monitoring the development of DERs

ScottMadden has developed the following document, which provides an overview of DERs, a description of why they are causing so much upheaval in the industry, a summary of the NARUC reports, and an outline of the key questions utilities must address in relation to DERs.

Additional Contributing Authors: Eric Hanson, Frank Nelms

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