Inclining for the climate: GHG reduction via residential electricity ratemaking

On the campaign trail, then-Senator Obama made ambitious statements regarding renewable energy investment and greenhouse-gas (GHG) reduction goals. In the electric power sector, an essential component of significant GHG reduction is energy efficiency. In the arena of electricity efficiency, much attention has been given to building codes and weatherization, efficient lighting and appliance standards, and other measures that can be undertaken by businesses and households, often with incentives from the local electric utility. An inclining block rate has a per-kilowatt hour charge that increases with a consumer's monthly kWh consumption. Most inclining block rates use a two-tier design, though three- or more tier designs do exist. Utilities that emphasize demand-side management (DSM) programs might be expected to use inclining block rates, which provide a strong incentive to conserve and shorten the payback period for energy-efficiency measures. To be sure, utilities with higher DSM expenditures are more likely to employ inclining block-rate structures. Copyright © 2009 Public Utilities Reports.