How marginal cost pricing impacts rates

In several recent filings before the Minnesota Public Utilities Commission, Minnesota’s rate-regulated electric and gas utilities have requested changes to the rates they charge customers to recover costs of providing service. Through these and other proceedings, rate design has become a primary focus of utility policy due to its impact on how customers use and pay for the energy they receive. Fresh Energy has provided analysis, testimony, and recommendations in these proceedings to ensure rates encourage energy efficiency and allow fair compensation for onsite generation like solar.

Avoided cost utilized in solar pricing after decades of impacting conservation

This summer, Minnesota became the first state in the nation to adopt a value of solar (VOS) tariff. This methodology, in contrast with net metering for solar generation, has a 25-year bill credit schedule rather than simply mirroring the retail rate as it fluctuates over time. While factoring in avoided cost may be a new idea for solar, factoring in the value of avoided cost has been used to analyze energy efficiency programs for over 40 years.