The DER revolution exposes flaws in traditional utility billing systems

Legacy customer information systems can provide significant challenges in transitioning to a cleaner, more dynamic power grid. 

Customer information systems, or CIS, are the backbone of utilities’ meter to cash process, performing a variety of critical functions like customer billing and implementing new rate structures. But the traditional methods are struggling to scale as utilities create more programs focused on providing incentives for customers to change their behavior by using energy at different times of the day.

A new report from Guidehouse shows that legacy CIS were not built to perform multiple rate calculations, leading to arduous processes to accurately bill customers enrolled in various energy efficiency, demand response, and DER-focused programs. The shortcomings of traditional CIS could lead to both lower customer satisfaction and lower program adoption rates because they were not built at a time when utilities focused on customer engagement.

Filling in the gaps of traditional CIS

In response to these limitations, a small but burgeoning market of complex rate engines and analytics providers are filling in the gaps where traditional CIS solutions fall short. 

The Guidehouse report identifies GridX as a leader in the space because of the company’s ability to generate new rates and pricing schemes for customer programs using billing data, load forecasts, and cost-of-service studies. GridX can also determine the impacts new rates will have on bills and assist with complex billing. 

Michael Kelly, one of the authors of the report, confirmed the limitations of legacy CIS in an interview, explaining that “they were architected to precisely and accurately calculate traditional tariffs”. “This is a problem because the compute, scalability, and automated billing requirements of new, complex rate structures are often too much to handle for legacy CIS,” he added. 

Because legacy systems struggle to automatically bill for multiple rates, utilities are left to find manual workarounds or upgrade their systems, which Kelly said is costly and complex. 

In California, where new rates are mandated for peak shaving and DERs, San Diego Gas & Electric identified “risk associated with its outdated CIS” and concerns about inaccurate billing. Pacific Gas & Electric also cited the “technical deficiencies” of its CIS, which forced the utility to incur additional labor costs to develop new billing solutions. 

The evolution of complex rates

In the new era of growing power demand, utilities are exploring new ways to curb or shift peak demand with time-varying pricing. But concerns about unpredictable or inaccurate bills prevent customers from enrolling in these programs — only 10% of eligible customers in the U.S are enrolled in time-of-use programs. 

Traditionally, a technique known as “shadow billing” would encourage customers to enroll in energy efficiency or money saving programs. 

“Shadow billing essentially tells a customer what their monthly bill would be under a new rate structure, even before they sign on to it,” said Kelly. 

Kelly added: “Some CIS can handle a certain level of comparative analysis, such as estimating potential bill savings when signing up for basic time-of-use rates” but “the tricky part is when you get into more complex rate structures, for example, critical peak pricing, real-time pricing, or DER- and EV-oriented rate structures."

That’s where complex rate engines, like GridX, come into play. The software provider can design new rates and tariffs using full population analysis and what-if scenario modeling. Combined, the techniques allow utilities to offer different rates to specific customer groups, such as a charging rate for EV owners or a virtual power plant pricing scheme for customers with solar and storage. And, critically, the complex rate engine performs highly accurate billing for various programs.

Scott Engstrom, co-founder and chief customer officer of GridX, said that more complex rates fall into several categories and two of the most common are: critical peak pricing (CPP) or peak time rebates (PTR), and demand charge.

Customers enrolled in critical peak programs will receive a discount on their normal rate throughout the year in exchange for agreeing to a very high rate during critical events, which are typically limited to eight to 12 days a year. PTR programs provide credits to customers that reduce their energy during those critical events. 

“The rate [for those peak times] might be 10 times as expensive,” explained Engstrom, “so the customer is really incentivized to reduce their energy consumption.” 

Unlike critical peak pricing, which is based on kilowatt hours during a specific event, demand charges are based only on kilowatts, or overall consumption. 

“It's like your internet providers who charge you for bandwidth. The more bandwidth you procure as part of your contract, the more you pay,” explained Engstrom. Customers enrolled in demand charge programs will pay more during their highest consumption period during the day or month, which incentivizes them to spread out their usage.

Enabling the economic value of DERs

These more complex, time-varying rates improve the economics of DERs because they allow utilities to incentivize customers and aggregators to either draw or discharge power based on overall grid needs. “For example, a battery can respond to price signals,” and “wait for times of the day when energy is very low to store energy,” said Engstrom. “Then later in the day, when prices are higher, it can discharge electricity onto the grid.”

Burgeoning VPP technology is reliant on the complex rates that enable economic dispatch of DERs. “[VPPs] have enough capacity to take from the grid when needed and add to the grid when needed, and what makes that all work out is price incentives that are built into the rates.” 

Engstrom hopes the economic incentives will encourage more customers to adopt DERs. “[GridX] can tell you quite precisely what is the value of participating in a VPP, of purchasing a DER,” said Engstrom. 

But as of now, adoption is still low. Engstrom said the industry has “done a really good job attracting typical first movers”, but still has a long way to go. “Education about these new rates is really important to create VPPs and get the kind of adoption we're going to need to reach our decarbonization goals,” he said.

This is partner content, brought to you by GridX. To request a copy of the report, click here.