  This two-part paper addresses the design of retail electricity tariffs for
distribution systems with distributed energy resources such as solar power and
storage. In particular, the optimal design of dynamic two-part tariffs for a
regulated monopolistic retailer is considered, where the retailer faces
exogenous wholesale electricity prices and fixed costs on the one hand and
stochastic demands with inter-temporal price dependencies on the other. Part I
presents a general framework and analysis for revenue adequate retail tariffs
with advanced notification, dynamic prices and uniform connection charges. It
is shown that the optimal two-part tariff consists of a dynamic price that may
not match the expected wholesale price and a connection charge that distributes
uniformly among all customers the retailer's fixed costs and a price-volume
risk premium. A sufficient condition for the optimality of the derived two-part
tariff among the class of arbitrary ex-ante tariffs is obtained. Numerical
simulations quantify the substantial welfare gains that the optimal two-part
tariff may bring compared to the optimal linear tariff (without connection
charge). Part II focuses on the impact of two-part tariffs on the integration
of distributed energy resources.
