California orders utilities to offer dynamic power pricing

<p class="p1"><span class="s1">California regulators have ordered the state’s top utilities to adopt dynamic electricity pricing, which the Solar Energy Industries Association (SEIA) said will cut renewable curtailment and lower costs.</span></p><p><strong>From <a href="https://pv-magazine-usa.com/2025/09/11/california-requires-utilities-to-offer-dynamic-pricing-that-favors-low-cost-renewables/" rel="noopener" target="_blank">pv magazine USA</a></strong></p>
<p class="x_MsoNormal"><span>The California Public Utilities Commission (CPUC) has </span><a href="https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M578/K182/578182496.PDF" rel="noopener noreferrer" target="_blank" title="https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M578/K182/578182496.PDF">ordered</a> the state’s three major electric utilities to develop and offer to all customer classes demand flexibility rates in which prices change at least hourly in response to the changing wholesale cost of electricity and other factors.</p>
<p class="x_MsoNormal">The new rates are expected to reduce solar curtailment, because when solar generation is high, wholesale electricity costs are lower, and customers who choose flexible rates will be able to shift some of their consumption to lower-cost hours when the sun is shining.</p>
<p class="x_MsoNormal">Certain electricity-consuming devices can shift consumption dynamically in response to price signals, using software and communications capability, and <a href="https://pv-magazine-usa.com/2024/08/20/california-advances-flexible-demand-that-can-absorb-renewable-power/" rel="noopener noreferrer" target="_blank" title="https://pv-magazine-usa.com/2024/08/20/california-advances-flexible-demand-that-can-absorb-renewable-power/">more such devices</a> are expected to enter the market.</p>
<p class="x_MsoNormal">SEIA argued for the flexible wholesale price component, and CPUC required it, saying it would reduce renewable curtailment.</p>
<p class="x_MsoNormal">SEIA also argued for a price component that will support efficient utilization of the distribution grid, to potentially reduce long-term distribution upgrade costs and save customers money. The CPUC required that price component as well, which is based on the marginal cost of expanding distribution infrastructure.</p>
<p class="x_MsoNormal">The CPUC said these price components and several others will “provide accurate price signals that promote economically efficient load shifting and support grid reliability.” A primary objective of the requirements is to reduce curtailment of renewable energy and reduce carbon emissions associated with meeting the state’s future system load, the commission said.</p>
<p class="x_MsoNormal"><b>Customer protection</b></p>
<p class="x_MsoNormal">The three utilities affected by the rule – PG&amp;E, SCE, and SDG&amp;E – must choose one of several customer protection options to enable wider adoption of flexible rates “without creating large structural bill impacts,” said CPUC.</p>
<p class="x_MsoNormal">One customer protection approach would use two-part subscription tariffs. These rates would include a customer-specific load-shape subscription that is billed at the otherwise applicable tariff rate.</p>
<p class="x_MsoNormal">CPUC staff cited a Lawrence Berkeley National Laboratory study finding that this approach would minimize impacts on customer bills and utility revenue recovery, while incentivizing load-shift behavior.</p>
<p class="x_MsoNormal">Edward Cazalet, CEO of dynamic pricing consultancy TeMix, has described two-part subscription tariffs by analogy to <a href="https://pv-magazine-usa.com/2025/08/27/dynamic-pricing-is-superior-to-virtual-power-plants-says-dynamic-pricing-pioneer/" rel="noopener noreferrer" target="_blank" title="https://pv-magazine-usa.com/2025/08/27/dynamic-pricing-is-superior-to-virtual-power-plants-says-dynamic-pricing-pioneer/">baseball season tickets</a>.</p>
<p class="x_MsoNormal">The three utilities subject to the CPUC order have the option to include energy export compensation, such as from batteries, in their demand flexibility rates. If export rates are included, those rates would be lower than import rates.</p>
<p class="x_MsoNormal"><b>Foundational work</b></p>
<p class="x_MsoNormal">California utilities have conducted several <a href="https://pv-magazine-usa.com/2022/06/15/real-time-pricing-that-balances-renewables-could-save-33-billion-per-year-study-finds/" rel="noopener noreferrer" target="_blank" title="https://pv-magazine-usa.com/2022/06/15/real-time-pricing-that-balances-renewables-could-save-33-billion-per-year-study-finds/">pilot studies</a> of dynamic pricing.</p>
<p class="x_MsoNormal">The state’s five largest utilities are already required to <a href="https://pv-magazine-usa.com/2022/10/26/california-requires-utilities-to-develop-and-post-hourly-retail-electric-rates/" rel="noopener noreferrer" target="_blank" title="https://pv-magazine-usa.com/2022/10/26/california-requires-utilities-to-develop-and-post-hourly-retail-electric-rates/">post and update</a> at least hourly their existing and newly adopted time-varying rates in the state’s MIDAS database.</p>
<p class="x_MsoNormal">Nationwide, achieving flexible demand for power with dynamic prices would yield annual system <a href="https://pv-magazine-usa.com/2022/06/15/real-time-pricing-that-balances-renewables-could-save-33-billion-per-year-study-finds/" rel="noopener noreferrer" target="_blank" title="https://pv-magazine-usa.com/2022/06/15/real-time-pricing-that-balances-renewables-could-save-33-billion-per-year-study-finds/">savings of $33-50 billion</a>, found a 2022 study by Pacific Northwest National Laboratory.</p>