Demographic impacts of utility rate designs

Historically, utility customers have been differentiated into various customer classes, based on their utility service demand characteristics. In this paper we argue that greater differentiation, if based on value and cost of service, can be justified on grounds of economic efficiency, and if done properly can also promote economic equity. This would require a break with traditional customer classifications. With this break, more detailed information on how and why certain utility services arc consumed would be required. In line with the issue of heterogeneity, within the residential customer class, is the differential impact that different utility rates might have on different population groups. The purpose of this paper is to show how differences in the pattern of energy use may give rise to disparate economic impacts depending on the rate structure and how more equitable and efficient outcomes might be achieved if these differences are taken into account. For this purpose, an analytical model has been developed under the auspices of the US Department of Energy, Office of Economic Impact and Diversity. The Energy Policy Socioeconomic Impact Model (EPSIM), an econometric simulation model, has been developed to assess the economic impact of utility rate designs and demand-side management programs on various population groups. The following discussion provides a conceptual description of the theoretical underpinnings associated with the EPSIM.