Over 1,000 D.C. homes are now equipped with smart electrical meters that record their hourly electricity usage, encourage conservation during peak times, and even automatically turn down the heat or A/C when electricity is most expensive. The meters are part of a pilot program starting this week to study how “price signals” can encourage consumers to save electricity by providing them with more information about the amount and price of power consumed.
Although the generation of electricity has been deregulated in Washington since 2001, about 99% of PEPCO customers subscribe to the Standard Offer Service, the rate charged to users who have not selected an alternate source. The cost of the electricity is calculated from the average rate of contracts from power plants, plus an administrative charge and taxes. The rate is changed yearly and only adjusted twice a year. This means that even though the generated supply and consumer demand for electricity can range widely, consumers have little incentive to modify their behavior. The idea is that by charging more to consumers during peak times (or, offering discounts for those who conserve at those times) will save consumers money and help PEPCO reduce the peak demand.
From the PEPCO announcement, here are the three pricing options the program is testing:
Under Hourly Pricing, electricity prices will vary hourly. The prices will be set a day ahead, based on prices in the “day ahead” wholesale market operated by PJM Interconnection, the regional power grid. Prices will be available on the project’s Web site or displayed real-time on “smart” thermostats. Based on recent wholesale market trends, hourly prices are expected to exceed conventional power supply prices only about a third of the time within a year, with lower prices the remainder of the time. Customers will be notified of high priced hours a day in advance through an automated phone call, an e-mail, text page or “smart” thermostat notification.
With Critical Peak Pricing, peak prices will be in effect for four hours on critical peak days, of which there are about 15 each year. These critical peak hours during which higher prices are charged will be limited to about 60 hours per year. Customers will be notified of these events the day before through an automated phone call, an e-mail, text page or “smart” thermostat notification. Prices during the critical peak hours will be substantially higher than conventional rates but will be offset by lower prices during the remaining 8,700 hours of the year.
Under Critical Peak Rebate, participants will continue to pay the same generation charges as the Standard Offer Service charged by Pepco. During critical peak events, however, customers can earn rebates by reducing their consumption below what they would normally have used during those times. Customers will be notified of these events the day before through an automated phone call, an e-mail, text page or “smart” thermostat notification.
Presumably the results from the program will help PEPCO decide which of the above policies to eventually extent to all residential customers. For now the program is closed since the program website reports they received a “tremendous” response from the 1,400 customers invited to participate one year ago. Although there’s not much there yet, one of the project’s sponsors, the D.C. Office of the People’s Council, has launched a blog to track the program.
In South Africa I experienced a related method for encouraging conservation: pre-paid electricity. We would purchase a fixed amount of electricity from an authorized seller such as a supermarket, and they would provide us a confirmation code we would enter into the meter in our rented home. The meter would recognize the code and display the total amount of electricity purchased, and slowly tick down the balance as you used it. In fact, the Wall Street Journal reported last year that “A half-dozen utilities are trying prepaid programs now, but that could accelerate quickly.” We found that a conspicuous meter in the kitchen ticking away our money made us highly aware of our power consumption. Participants in the Arizona program described by the Wall Street Journal cut their power usage 12%.
What about consumers generating their own power? Although PEPCO allows consumers to generate power for the grid from renewable technology through their Green Power Connection program, SproutDC pointed out in a previous comment that D.C. does not offer rebates or incentives for the installation of solar power systems like California or New Jersey.
> Power Cents DC
> DC Office of the People’s Council: D.C. Electric “SMART METER” Pilot Program Announcement, Blog
> PEPCO: Residential Pilot to Test “Smart Metering” for DC Electric Customers
> PR Newswire: Smart Metering and Demand Response Pilot Goes Live in Washington D.C.
> Wall Street Journal: “New Ways to Monitor Your Energy Use“