Energy Affordability and the Grid: What Recent Research Reveals About Causes and Potential Solutions

**Bryce Yonker** (0:00)
Welcome to the next edition of Grid Pulse. I'm Bryce Yonker with Grid Forward.
Today, we have two fantastic guests with us, Christopher Knittel and Ryan Hledick. Thank you, gentlemen, for being on.

**Ryan Hledick** (0:12)
Thanks, Bryce.

**Christopher Knittel** (0:13)
Yeah, thanks for having me.

**Bryce Yonker** (0:15)
So we're going to cover the kind of ever important topic, but maybe all the more so these days on grid affordability. I appreciate you two gentlemen joining.
It's kind of a hot button issue these days. So maybe we'll just start with some quick introductions. Ryan, if you don't mind, I'll let you say how many years you've been there at Brattle, if you want. But if you can just do a quick introduction, that'd be great.

**Ryan Hledick** (0:37)
It's hard for me to keep track, but LinkedIn reminds me every year. That's how I know. So, yeah, great to be with you. Ryan Hledick, I've been with Brattle for 20 years. I'm a principal here, focused on all of the kind of exciting stuff that's happening on the customer side of the meter and electricity prices and customer bills are a big focus of all of that work. So, looking forward to talking about this.

**Bryce Yonker** (0:58)
Great. And Professor Knittel, we're going to go by Christopher, if that's all right for you.

**Christopher Knittel** (1:03)
Sure.

**Bryce Yonker** (1:03)
I saw you've been there at MIT for some time. So, if you can do a quick background, that'd be great.

**Christopher Knittel** (1:07)
Yeah, I'm older than both of you, but I won't tell you when I started. So, I'm Chris Knittel. I'm a professor of applied economics in the Sloan School of Management here at MIT. And I also direct two centers on campus, one called the Center for Energy and Environmental Policy Research, and the other being the MIT Climate Policy Center.

**Bryce Yonker** (1:29)
Fantastic. Gentlemen, thanks for being on. I guess we'll start with Christopher with you on this one. It almost feels like all corners of the electric grid right now are talking about affordability.
Why is this the topic right now?

**Christopher Knittel** (1:45)
Yeah, I think there's a couple reasons for that. One is just affordability generally across the entire economy is a big topic. We just saw 4% inflation yesterday come out. So general prices have been increasing for quite some time.
If we dive deep into the electricity sector, the electricity sector has been growing faster than the rate of inflation. So it's been going up even faster. But I think the other reason why there's been a lot of focus on electricity prices is we're trying to electrify things and we're actually trying to grow electricity demand. And we're seeing growth in electricity demand after decades of very flat demand growth. So everything's kind of pointing at the electricity industry for that reason. And of course, if you're growing demand and prices are going up, that can be a problem.

**Ryan Hledick** (2:44)
What I would add to Chris' comments is that we're also seeing different portions of the kind of the US population being impacted differently. Lower income customers, I think, are feeling this hit harder than other customers are. And so that income disparity consideration is an important piece of this as well.

**Bryce Yonker** (3:03)
Well, that was going to get to my second question. Maybe you can keep this thread going, Ryan. Price increases are not the same everywhere. And I mean that by customer classes as well as geographic locations. You know, what places or populations are seeing the higher increases?
Sure.

**Ryan Hledick** (3:20)
I mean, if you think about just customer segments, residential, commercial and industrial, we have seen residential rates increasing faster than commercial and industrial rates. There could be several reasons for that. I think one of the big drivers is on a per kilowatt hour basis, residential customers tend to be heavier users of the distribution system. Distribution costs have been increasing for a number of reasons that I'm sure we'll get into. So that portion of the bill in particular, I think is growing faster for households than it is potentially for commercial and industrial customers. Let's go to the customer segmentation question in terms of geography. We have seen rates rising in California in particular, in other Western states, particularly recently.
A big driver of that is the cost of wildfire risk mitigation, but it is a very regional issue and there are different drivers for rate increases across different parts of the country.

**Bryce Yonker** (4:11)
Christopher, I will kick this one to you. By affordability, I mostly mean what customers pay for power, a kilowatt-hour or at least their total bill.