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Responding to EPAct 2005: Looking at Smart Meters for Electricity, Time-Based Rate Structures, & Net Metering
Kenneth Gordon, Wayne Olson, and Amparo Nieto

This paper offers guidance to state regulators who must consider the case for the adoption of smart meters, which can allow the introduction and/or expansion of a variety of time-based rates. Smart meters can also provide other benefits to utilities and customers. For example, smart metering can enhance utilities’ ability to monitor system conditions to immediately identify service outages. But the focus of this paper is on ratemaking issues. Questions that will need to be considered in responding to the 2005 revisions to PURPA’s requirements are first outlined. Then, the economic principles for introducing such rates are explained. Next is a discussion of the specific standards that the states are to consider pursuant to PURPA, the types of time-based rate designs that must be considered, and the implications of “net metering” policies. Also, the cost and benefits of deploying smart meters are surveyed. In the concluding section, there is an evaluation of the potential benefits and costs of time-based rate designs and net metering from an economic perspective.

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