PRESENTED TO EEI Rate Committee Meeting
Charlotte, North Carolina

Bonbright's Ten Commandments

1. Effectiveness in yielding total revenue requirements under the fair-return standard

2. Revenue stability and predictability

3. Stability and predictability of the rates themselves

4. Static efficiency, i.e., discouraging wasteful use of electricity in the aggregate as well as by time of use

5. Reflect all present and future private and social costs in the provision of electricity (i.e., the internalization of all externalities)

6. Fairness in the allocation of costs among customers so that equals are treated equally

7. Avoidance of undue discrimination in rate relationships so as to be, if possible, compensatory (free of subsidies)

8. Dynamic efficiency in promoting innovation and responding to changing demand-supply patterns

9. Simplicity, certainty, convenience of payment, economy in collection, understandability, public acceptability, and feasibility of application

10. Freedom from controversies as to proper interpretation

The "ideal" rate design

Distribution-only utilities should use a three-part rate

  • Monthly service charge
  • Charge for connected load (or maximum customer demand)
  • Maximum demand charge (coincident with the distribution peak)

Utilities that also supply energy should use a five-part rate

  • Monthly service charge
  • Charge for connected load (or maximum customer demand)
  • Maximum demand charge (coincident with the distribution peak)
  • Charge for generation capacity
  • Time-varying energy charge

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