ABSTRACT
This chapter discusses the innovative rate approaches developed by electric and gas utilities as a response to the increasing pressure for the development of a more competitive industry. The primary cost elements for rate-making activities include amount of use, energy costs, customer costs and demand costs. Some utilities base the customer charge to large industrial customers on the level of maximum annual use. The demand charge is usually applied to residential or small commercial customers, though it is not always limited to large users. Effects such as dynamic daily residential and commercial load profiles, changing weather conditions, customer renewable energy systems, and large local industrial use can influence the demand side of the equation. Surplus power rates are offered to large commercial and industrial customers. An alternative measure used by some electric utilities for commercial and industrial rates is energy per unit of demand.
