Pennsylvania: Determined to cut his electricity bill, Darrell Brubaker took the usual steps of raising his air conditioner’s thermostat and cooking more on the grill.
But the key to maximum savings,as much as 6% a month last summer was his grasp of the state of the electrical grid and his family’s willingness to adjust their power usage accordingly.
His utility, PPL Corp., is among a growing number of electricity providers that are testing pricing plans in which rates are set higher during the hours of peak demand, roughly following the curves of supply and demand in the wholesale energy markets.
As more utilities install “smart” power metres that track how much electricity flows into a home in real time, they are freer to offer alternatives to the average monthly rate that they traditionally charged to consumers.
The pilot programmes are the first step in what’s expected to be a complete transformation of the century-old power grid. Once a silent supplier of electrons to homes and businesses, it’s gaining the ability to talk back, not only to power companies, but to consumers and their appliances.
Armed with information, Brubaker, 56, took action. Besides switching his lamps to energy-saving compact fluorescent light bulbs, he chose to run his pool pump and dishwasher at night at his home in the suburbs and dairy country of south-central Pennsylvania.
Will cut costs and improve efficienciences
By signing up tens of millions of people like Brubaker to change patterns of electric usage, the companies expect new power metres and time-based rates to help avoid blackouts, curb greenhouse gas emissions and beat back the immediate need to build expensive new power plants.
Many utilities hope to make such rates available to all their customers within several years, with an eye toward shaving usage on the most demanding days of the year when electricity prices rise sharply.
While major industrial and commercial rate payers have operated on time-based rates for years, the concept remains relatively foreign to residential users.
Various kinds of smart metres are available and in use around the country. Depending on its capabilities, a smart metre, at a cost of about $200 per home also can play a role in how much information about energy use is made available to customers and how much money can be saved. The most advanced ones allow the utility and the customer to gauge usage and cost immediately, instead of once a month after a metre reader makes the rounds.
Utilities plan to offer a menu of rate plans. In its pilot, PPL offered something referred to as a “time-of-use” rate, where set periods of higher prices contrast with periods of lower prices. In this case, pilot participants paid more between noon and 7 p.m. on weekdays and less the rest of the time.
Some rates, called “real time,” change throughout the day as the wholesale price floats up and down. People who sign up for such plans may receive signals, such as e-mails or cell phone messages, to tell them prices are climbing dangerously.
“Critical peak” rates would apply only on the dozen or more highest-demand days of the year. So far, pilot programs have found that the average customer usually saves money. Critics note, however, that’s not always the case.
Last year, about 95% of the participants saved money in Commonwealth Edison’s open-enrollment residential real-time pricing programme, thought to be the first in the U.S. Majority saved between 7-12% and to date, about 4,000 of the utility’s 3.3 million residential customers have signed up.
Some consumer advocates remain skeptical. They warn that smart metres and fluctuating rates could be a multibillion dollar mistake that would shift people from the relative stability of an averaged, monthly rate and subject them to the unpredictable swings of the wholesale electricity market.
The testing ground will be a $2 million pilot set to begin in June, to be paid for by the utility. “If you don’t show consumers that there’s something in it for them, then they’re not going do to it,” Noel said. “You have to show people what it means to them, and people look at the bottom line of their electric bills.”
Gerald A. Norlander, the executive director of the Public Utility Law Project in Albany, New York, said that passing along the volatile price of wholesale electricity could shut down factories and devastate households. And he suggested that power plant owners could circumvent any conservation efforts by manipulating the supply of electricity to keep prices high.
Utility officials say they do not expect such time-based rates to become mandatory for most ratepayers. Some utilities may offer their ratepayers incentives to enroll, like rebates, discounts and temporary guarantees against paying more.
“There will be benefits to everyone, but without the technology, it won’t happen,” said Dennis Wraase, the chief executive of Pepco Holdings Inc., which wants to install smart meters for the nearly 2 million customers under its three utilities in Washington, D.C., and the mid-Atlantic.