Reducing greenhouse gas emissions by inducing energy conservation and distributed generation from elimination of electric utility customer charges

This paper quantifies the increased greenhouse gas emissions and negative effect on energy conservation (or “efficiency penalty”) due to electric rate structures that employ an unavoidable customer charge. First, the extent of customer charges was determined from a nationwide survey of US electric tariffs. To eliminate the customer charge nationally while maintaining a fixed sum for electric companies for a given amount of electricity, an increase of 7.12% in the residential electrical rate was found to be necessary. If enacted, this increase in the electric rate would result in a 6.4% reduction in overall electricity consumption, conserving 73 billion kW h, eliminating 44.3 million metric tons of carbon dioxide, and saving the entire US residential sector over $8 billion per year. As shown here, these reductions would come from increased avoidable costs, thus leveraging an increased rate of return on investments in energy efficiency, energy conservation behavior, distributed energy generation, and fuel choices. Finally, limitations of this study and analysis are discussed and conclusions are drawn for proposed energy policy changes.