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At present, pay for prescription models are insufficient at containing costs and improving access to medicines. Subscription financing through tenders, licensing fees and unrestricted or fixed volumes can benefit stakeholders across the supply chain. Pharmaceutical manufacturers can reduce the need for marketing expenses and gain certainty in revenue. This will decrease costs, improve predictability in budget expenditure for payers and remove price as a barrier of access from patients. Inherently, low- and middle-income countries lack the purchasing power to leverage price discounts through typical price arrangements. These markets can realise substantial savings for branded and generic medicines through subscription financing. Procuring of on-patent and off-patent drugs requires separate analysis for competition effects, the length of contract and encouraging innovation in the medicine pipeline. Prices of competitive on-patent medicines and orphan drugs can be reduced through increased competition and volume. Furthermore, pooling expertise and resources through joint procurement has the potential for greater savings. Incentivising research and development within the pharmaceutical industry is essential for sustaining a competitive market, preventing monopolies and improving access to expensive treatments. However, technical capacity, forecasting demand and the quality of generic medicines present limitations which necessitate government support and international partnerships. Ultimately, improving access requires progressive financing mechanisms with patients and cost containment in mind.

"Energy costs today are higher than they should be because customers value bill simplicity more than savings or environmental impacts," Brattle Group Principal Ryan Hledik, co-author of a new paper outlining a subscription-based rate design, told Utility Dive. "A FixedBill+ rate can combine a fixed bill's simplicity with the energy use benefits of energy efficiency and demand response," he said.

A groundbreaking 2018 subscription rate proposal by Lon Huber was less explicit about the role of enabling technologies and potential savings. Huber worked for Navigant at the time, but is now vice president for rate design and strategic solutions at Duke Energy.

"Many customers are no more interested in the electricity system details on their bills than they are in IT protocols and servers that stream their Netflix subscription," Huber told Utility Dive. "New energy service subscription concepts can stabilize the bill, increase clean resources, and lower electricity costs for all customers."

But regulators must be cautious because poorly designed subscription approaches and those that do not include access to enabling technologies could lead to over-consumption that imposes costs on other customers and compromises utility revenues needed for a reliable power system, electricity retailers and authorities on rate design told Utility Dive.

Surveys show some customers "prefer simplicity and freedom from managing their energy," the June 2020 Brattle Group-Energy Impact Partners (EIP) paper found. Instead of a bill for the changing amount of electricity a customer consumes each month, FixedBill+ would offer a monthly bill "guaranteed to remain constant for a specified term."

The voluntary rate is like those from "a growing number of subscription-based consumer goods" providers, the paper reported. Though interest from utilities, competitive electricity retailers, and third-party energy managers is growing, there are few results of real-world applications for electricity, they told Utility Dive.

Huber, who originated the Energy Service Subscription Plan in a detailed 2018 Navigant paper, agreed. But the hypothetical Brattle case, which is an important addition, "appears to be based on reasonable assumptions" and "shows a customer can save, the system can benefit from demand side management programs, and the utility is compensated for taking on additional risk."

Electricity providers, including Georgia Power, Consumers Energy and retailers in Texas, have offered fixed rate "all-you-can-eat" plans with no incentives to reduce usage, the recent Brattle paper said. The opt-in FixedBill+ "is entirely stable and predictable for the full one-year term," but also includes "flexibility benefits, environmental benefits, and cost savings from energy efficiency (EE) and demand response (DR) programs."

The first element in a FixedBill+ that can allow those benefits is "comprehensive energy management" by electricity providers through smart demand side management (DSM) technologies, the paper said. Customers must also consent to "periodic adjustments" to the initial fixed rate, as their usage patterns evolve. Finally, there must be "incentives for energy providers to reduce costs," it said.

Duke's Huber agreed. Only if the provider delivers "a compelling value proposition" with energy management through smart technologies and DR measures will it fully align its interests with those of the customer and the system, he told Utility Dive in 2018.

Those DR and EE technologies and measures could provide 200 GW of cost-effective load flexibility potential in the U.S. by 2030 that would reduce U.S. peak load by 20%, according to a 2019 Brattle Group study.

"A fixed rate, and not a variable per-kWh rate, is the best way to align the cost of service with changing system costs," Brattle's Hledik said. "This concept is ready for more market research, regulatory innovation and pilots."

The fixed charge part of the rate designs proposed by Brattle and Huber are not new, but have been rejected by state regulators who say they can drive overconsumption when not paired with home energy management technologies, said Autumn Proudlove, senior policy research manager at the North Carolina Clean Energy Technology Center, and lead author of the center's national policy activity quarterlies.

"Fixed charges are still being proposed, but we're seeing fewer of them," Proudlove told Utility Dive. And subscrtiption rates are still untested. The only subscription rate option to all residential customers that has even been proposed is from Arizona Public Service (APS), though Nevada's Senate Bill 300 ordered regulators to consider it, she added.

A recently completed proof-of-concept pilot tested a largely fixed subscription rate that included a small real-time pricing element, TeMix Founder/CEO Edward Cazalet, who partnered with Southern California Edison (SCE) on the pilot, told Utility Dive. Automated DR and EE technologies and programs were designed into the rate pilot.

Outcomes suggested that "on a widespread basis, those kinds of programs could significantly reduce peak load" and the pilot proved "automation works" when programable energy management technologies are available for customers to set to their preferences, Cazalet said.

SCE "has not formed an opinion on the practical adoption of such rates," SCE Principal Manager for Modeling, Forecasting and Economic Analysis Reuben Behlihomji emailed Utility Dive. But the utility sees "subscription pricing as a tool that customers can use to manage price or inflation risk" and supports studies and pilots "to further vet such pricing with and without smart technologies."

Voluntary fixed "budget bill" offerings from APS and Arizona's Salt River Project have given customers rate stability, Arizona Residential Utility Consumer Office (RUCO) Director Jorge Fuentes told Utility Dive. But APS's proposed subscription rate paired with smart DSM technologies and DR measures "can flow system benefits to all customers by helping to flatten peak demand," he said.

RUCO "would only support a pilot" of subscription rates and only if it shifts at "least part of the program's risk to shareholders and targets flattening peak demand to benefit all customers," he added.

A subscription rate "could be reasonable where somebody, presumably whoever manages the customer's load, would clearly be on the hook for higher costs," LeBel said. But "all-you-can-eat programs with one flat fee for any amount of electricity use are clearly unreasonable because it is important to have incentives to manage usage."

But a well-designed, voluntary subscription plan would allow the electricity provider to use DSM and automation to address over-consumption, Huber wrote in his 2018 paper. And any plan would be a "regulator-approved pricing agreement" designed to prevent cost shifts.

The concept, as described by Huber and the recent Brattle/EIP paper, continues to be carefully studied, Helen Lo, co-author of a 2019 paper on subscription rates and a member of the Sacramento Municipal Utility District distributed energy strategy team, told Utility Dive. "But work is needed to unpack the implicit assumptions about business process protocols and technologies."

A subscription-based model that includes DSM in a meaningful way can help optimize system costs but "would be a paradigm shift and requires evolution, not revolution," Lo said. "There are many important questions that go beyond the Brattle paper, and now is the time to do the methodical groundwork necessary."

The concept must consider "reliability, future transmission and distribution infrastructure requirements, and the entire palette of system needs," she said. And subscription rate designs will also require "forward thinking" because programs and offerings will change as energy supply "moves from 45% to 50% of the total system cost toward zero marginal cost," she added.

"Customers don't buy electrons, they buy the value the electrons have for their businesses or homes, and cost is not independent of value," she said. With a nearly zero marginal cost energy supply, "instead of the electricity provider sending a price signal, the customer's choice of program and program cost is the signal."

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