CAIRO: Customer Affordability, Incentives, and Rates Optimization Model
NREL's Customer Affordability, Incentives, and Rates Optimization (CAIRO) model estimates the impact of utility rate and program design decisions on customers using detailed customer load data and forecasted power system scenarios.
Retail electric utility rate design has important implications for both customer affordability and the broader power system. Price signals from rates can influence how customers consume electricity and make investment decisions in distributed energy resources (DERs), energy efficiency technologies, and smart devices.
Rates affect not only how grid investments are paid for but also what types of investments are made and when. CAIRO offers key capabilities to stakeholders navigating an evolving power system with higher capital costs, increasing DER adoption, and significant load growth.
CAIRO can help develop, model, and evaluate the impacts and trade-offs of different rate designs under future power system conditions. This can help regulators and stakeholders:
- Evaluate how future power system investment decisions will affect ratepayers
- Explore how different rate designs will impact customer energy affordability
- Identify existing and potential cost shifting between customers within and across sectors
- Test whether rates will result in utility revenue sufficiency
- Assess other outcomes using metrics aligned with standard rate design principles.
Capabilities
CAIRO delivers clear, accessible results to regulators and stakeholders interested in understanding trade-offs associated with rate design and utility demand response program design. CAIRO incorporates:
- Customer loads and data
CAIRO uses real-world utility data and leverages NREL's flagship energy consumption tools (such as ResStock™), demand flexibility tools (such as OCHRE™), and other technology-specific tools (such as EVI-Pro and dGen™). This approach offers a detailed view of customer loads, DER adoption patterns, and key demographics such as income level. - Current and future power system costs
CAIRO uses detailed information on bulk power system costs and trends from utilities and NREL tools (such as ReEDS™ and Cambium) to evaluate how changing customer load patterns could influence utility revenue requirements. - Rate design and program options
CAIRO can test a wide array of rate structures (e.g., demand charges, time-of-use rates, and critical peak pricing), DER compensation mechanisms (such as net metering and net billing) and rate-funded programs (such as low-income bill assistance programs or on-bill tariff financing for energy efficiency investments). - Helpful visualizations
CAIRO delivers easy-to-interpret visualizations and metrics to support users in evaluating the trade-offs between rate design and program options. - Evaluation metrics
CAIRO calculates a wide array of standard and novel metrics aligned with Bonbright Principles, including affordability, customer bill stability, economic efficiency, and fairness. This ensures CAIRO's modeled results are easy to interpret and rate design options are simple to compare.
The table below provides information about CAIRO's evaluation metrics.
| Metric | Description | Units | Rate Design Principle |
|---|---|---|---|
| Average Annual or Monthly Bills | Average annual or monthly bill (electric, natural gas, gasoline) | $ | Affordability |
| Energy Burden | Annual electricity and natural gas bill divided by household income | % | Affordability |
| Standard Deviation (SD) | SD of monthly bills over a year to measure volatility; SD of each customer's bills is determined, and a scenario average is presented | $ | Bill stability |
| Coefficient of Variation | Ratio of standard deviation to mean, by each customer, averaged across all customers | N/A | Bill stability |
| Rate Change Delta | Difference in rates costs between rate periods (e.g., off-peak versus peak periods) | $/kWh | Rate stability |
| Option Count | Number of rate levels per period (e.g., year, season, day) | N/A | Customer simplicity and acceptability |
| Deadweight Loss | A measure of market inefficiency that is created when the unit rate charged is different from the unit marginal cost | $ | Economic efficiency |
| Avoided Cost | Total avoided costs across all customers, driven by load shifting (e.g., reductions in marginal costs such as avoided fuel costs) | $ | Economic efficiency |
| Better/Worse Off | Number of customers with lower (better) or higher (worse) annual electricity bills compared to the customer's bill in a baseline scenario | N/A | Fairness |
| Bill Alignment Test (BAT) | The difference between a customer's annual electricity bill and the fair allocation of costs to the customer, which is the product of the customer's hourly load and hourly marginal costs plus the share of system residual costs allocated to the customer | $ | Fairness |
| Sub-Class Breakdown | Consumer sub-class breakdown of evaluation metric | N/A | Fairness |
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Last Updated Aug. 12, 2025