Now that California has AMI, what can the state do with it?

Recognizing the lack of retail-demand response, a state regulator, such as the California Public Utilities Commission (CPUC), seeks tariff proposals that transmit wholesale price signals to a local distribution companyʹs (LDC) retail customers. To enable these proposals, the CPUC has authorized funding for advanced metering infrastructure (AMI) for two investor-owned LDCs. Assuming regulatory approval of the third LDCʹs application, the stateʹs US$4.28 billion AMI investment will aid new rate designs for 11.3 million electricity customers. Now that California has AMI, what can the state do with it? With AMI in hand, an LDC can implement service options that can further the stateʹs energy initiatives, ranging from resource adequacy requirement (RAR) to greenhouse gas (GHG) emissions reduction. These options can efficiently allocate limited capacity based on each customerʹs willingness to pay, without the unnecessary distinction between price rationing and reliability differentiation. They can be Pareto superior, welfare dominating the default tariffs that apply to these customers. A case in point is the generalized demand subscription service (GDSS) option proposed in this paper. However, it is unclear whether the option will find wide customer acceptance, without an LDCʹs intensive customer education and marketing efforts.