The Tariffs of Tomorrow By Ahmad Faruqui and Cecile Bourbonnais T TODAY, MOST AMERICAN RESIDENTIAL CUSTOMERS pay for electric service via tariffs that are structured as two-part rates consisting of a fixed monthly charge and a volumetric energy charge expressed in U.S. dollars per kilowatt-hour. The fixed-charge component generally comprises a small portion of the bill, which is dominated by the volumetric charge. California's energy crisis in 2001-2002 triggered an important discussion about the need to better connect retail and wholesale markets. Since then, scores of pilot programs Digital Object Identifier 10.1109/MPE.2020.2972136 Date of current version: 17 April 2020 18 ieee power & energy magazine have been carried out with time-varying rates. The empirical evidence shows that customers can understand and respond to incentives provided by new tariffs that convey the cost structure of electricity to customers. Additionally, smart meters now track the energy use of half of all U.S. residential customers, removing a major barrier to the deployment of modern tariffs. The introduction of smart digital technologies, changing consumer tastes, and new state policies promoting renewable energy sources have cast doubt on the sustainability of the utility business model based on traditional two-part tariffs. This shift comes at a time when many utilities are making significant investments to modernize the grid and 1540-7977/20©2020IEEE may/june 2020