National Grid Rate Design Principles
1 Reflect cost-causation and minimize cross-subsidization: Rates should be designed to reflect
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how costs actually incur on the system. For example, fixed costs should be recovered from fixed
charges. Rates should also minimize cross-subsidization and result in customers paying in
accordance with the costs that they impose on the system.
Encourage efficient behavior: Rates should help to keep system costs (and thus customer bills)
low in the long-term by encouraging customers to consume energy in a way that maximizes the
efficiency of the system (as well as encouraging development of technologies that facilitate this
response), promoting high load factors and reducing the need for peak-driven capacity
investments.
Provide an effective vehicle for cost recovery: Distribution/delivery rate design must provide
the opportunity for a utility to recover prudently-incurred costs associated with services it
provides, and enable efficient regulation that reduces reliance on adjustment mechanisms or
frequent rate cases.
Be sustainable as the system evolves: Distribution/delivery rate design should be robust under
current and potential future business models. They should be reflective of utility costs so that
utilities can recover those costs in an appropriate manner and customers can make long-term
decisions on consumption that enables savings based upon an expectation that rates will provide
value over the long-term.
Must reflect recovery of all societal program costs: Rate design must provide the opportunity
for a utility to recover prudently-incurred costs associated with legislatively mandated societal
programs (i.e., energy efficiency, renewable energy programs, etc.) funds, and enable efficient
regulation that reduces reliance on adjustment mechanisms or frequent rate cases.
6 Be simple enough for customers to understand and enable them to make economic decisions
in response. Any changes in rate structures should be implemented gradually in order to allow
ample time for customers to understand new rates and to lessen immediate bill impacts.