Electricity as a Service: Cost Causation-based Utility Rate Model in the Future Distribution Grid

Distribution grids across the world are undergoing profound changes due to advances in energy technologies. Electrification of the transportation sector and the integration of Distributed Energy Resources (DERs) such as photo-voltaic panels and energy storage devices has gained substantial momentum, especially at the edge of the grid. However, the massive transformation in the technological aspects of the grid could directly conflict with existing utility business models and tariff structures applied to retail customers. This paper proposes a restructured business model where the implementation of these grid-edge technologies is aligned with the interest of all stakeholders involved in the electricity ecosystem. This envisions a shift from treating electricity as a commodity where the users are charged based on their volumetric consumption, to treating it as a service provided to the end-user by the utility company based on the principle of cost-causation. The proposed rate structure considers the impact of individual customers on the distribution grid by calculating metrics that contribute directly to the costs incurred by the utility companies, namely magnitude and variability of the demand.