Modern Rate Design in the Northeast: Unlocking Efficiency, Affordability, and Electrification

The Northeast and Mid-Atlantic regions face some of the highest energy costs and energy burdens in the country. Regionally, energy costs are rising, just as they are nationally, due to growing demand from data centers, rising gas and electricity supply costs, and increasing utility expenditures on transmission and distribution infrastructure. Meanwhile, spiking electricity demand, shifting and increasing system peaks, and the evolution of technology—such as advanced metering infrastructure (AMI), heat pumps, and electric vehicles—create opportunities to align electricity rates with changing consumption patterns. While some utilities have advanced time varying and technology-specific rates, most customer bills still consist of a traditional two-part rate and have not evolved to help meet these emerging challenges. Modern rate design enables utilities to lower electricity costs for customers, reduce demand when needed, support states’ electrification goals, and save customers money.

Utilities and regulators have long used rates to drive energy efficiency. Today, emerging priorities often compete with other objectives, including aligning prices with electrification, optimizing grid use, and ensuring affordability. Modernizing rates can accomplish these priorities and optimize the way we use electricity. This paper provides a framework for regulators, state policy officials, utilities, and other stakeholders to examine four key priorities when designing modern rates:
1. Ensuring rates continue to drive energy efficiency
2. Aligning rates with new usage patterns for electric technologies
3. Using rates to encourage demand flexibility
4. Aligning rates with goals of equity and affordability