A policy design perspective on electricity rates

Nicholas Oesterling

Policy Design and Practice, February 2024

Nicholas Oesterling

Public Administration & International Affairs Department

Center for Policy Design and Governance

Center for Policy Research

Energy

United States

Policy Design and Practice

Nicholas Oesterling

Electricity rates affect citizens’ energy-related behaviors. In the past and present, studies of the behavioral influences of the designs of these rates have heavily focused on the structure and effects of pricing mechanisms. This price-centric perspective has, this paper demonstrates, led other crucial aspects of rate designs to be overlooked despite their potential implication for more efficient and equitable citizen energy access and climate change mitigation. To explore the composition of rate designs beyond the oft-examined pricing component, this study develops and utilizes a novel application of policy design scholarship to more comprehensively examine the rate designs that facilitate residential electricity provision and shape energy consumption behaviors. Through this approach, multiple design elements and more granular sub-elements are identified in contemporary rate designs. Furthermore, emergent properties of rate design diversity and complexity are discerned as design features occur individually and combinatorically. Ultimately, this study not only tractably expands the concept of rate designs, but also advances a method for examining the policy instruments through which public service provision occurs.