Solar energy and public utility rate regulation

It is suggested that solar energy users must be able to resort to the public utilities as a backup source of energy when their solar systems do not provide for all their energy needs. An introduction to the regulatory process is given. Part I of the article is divided into three sections: (1) nature of demand costs and influence of solar backup service; (2) how the total costs (customer costs, energy costs, demand costs) are allocated to various customer classes; and (3) how allocated costs (particular demand costs) are built into the utility rate structures used to calculate the charge to each customer. Together (2) and (3) demonstrate that the potentially high cost of solar backup service is a function of both demand costs and cost allocation. Part II provides arguments that conversion to solar power can proceed without threatening existing utilities. Time of use rates (significantly higher rates for on-peak than for off-peak service) would be the most understandable and acceptable to the public and provide an economic incentive for greater use of solar energy. 105 references. (MJJ)