Distribution Network Revenue Recovery and Allocation with Energy Communities

The growth of distributed energy resources and Energy Communities (ECs) is reducing electricity drawn from the grid, thus lowering volumetric revenues for distribution system operators (DSO) who must recover fixed network costs through higher tariffs. This creates a trade-off between ensuring DSO financial viability, keeping ECs economically attractive, and avoiding unfair cost increases on other users of the network. This balance could trigger a utility death spiral of declining demand and rising network charges, if not properly addressed through tariff design. This paper develops a framework to examine how restructuring grid tariffs across volumetric, capacity-based, and fixed tariff components affects DSO revenues, EC formation decisions and fair cost allocation. Using a bill-minimisation model for two distinct energy managements systems, DSO revenues are evaluated across 100 alternative tariff structures generated though Latin Hypercube Sampling, benchmarked against French grid tariffs. Preliminary findings suggest that only nine tariff combinations reduce the DSO revenue loss relative to the baseline, of which only two achieve a strict Pareto-improvement, benefiting all parties simultaneously. Both are characterised by a very small volumetric component and a higher capacity-based charge, suggesting that shifting away from volumetric tariffs most effectively balances consumer welfare and DSO revenue recovery. However, across most tariff combinations, ECs benefit from comparatively larger bill reductions than groups managed individually, revealing a persistent trade-off between promoting collective energy management systems and ensuring fair cost distribution. This work adds to the existing literature by systematically analysing which tariff designs effectively reconcile DSO revenue requirements, consumer welfare, and fair cost allocation and provides policy recommendations for tariff adjustments and technical constraints.