Agencies Discuss Business Customers? Peak Price Underwriting

If businesses with interval meters pay power prices that rise and fall with demand, it will reduce blackout risks next summer, insisted some energy agency officials at a December 7 Energy Action Plan meeting. "We are not getting reductions from voluntary price signals," said Mike Peevey, California Public Utilities Commission president. He, along with fellow commissioner Susan Kennedy and California Energy Commission member Art Rosenfeld, proposed mandatory pricing on large customers next summer to curb demand at critical times. In response to the energy crisis, $35 million of ratepayer money was dedicated to installing a few thousands meters at businesses that use more than 200 kW--affording the option of reducing consumption at times of peak use in exchange for lower off-peak rates. Installing interval meters without a requisite pricing mechanism reduced the hardware?s efficacy by about 75 percent, Kennedy claimed. At the same time, she and the other two officials acknowledged that there could be disparate impacts on the large energy consumers, which represent about 30 percent of the state's load, and that a reworked rate structure was needed to deal with the nuances. Rosenfeld urged that metered businesses be required to use existing critical peak pricing next summer. That pricing scheme offers rate reductions 99 percent of the time but doubles the remaining 1 percent maximum peak price. Rosenfeld said that the pricing is revenue neutral overall and that many businesses "don?t give a damn" about the small savings from curbing power use during the hottest hours of the day in heat waves. On the other hand, that energy savings is a big deal to the state. However, he added, "Not everyone is Mr. Average." Some businesses, such as large office building operators, cannot shift their power consumption to off-peak periods and would pay higher utility bills. Dorothy Rothrock, California Manufacturers & Technology Association vice president, said it is important to avoid cost shifting among the same class of commercial ratepayers, but that summer reliability is of more concern. "If the goal is to create more equitable rates I don't know if it will get us more reliability," she said, noting her members largely have flat loads around the clock, unlike commercial building owners. CEC member Jackie Pfannenstiel noted that a possible carrot for large businesses with interval meters to shift load would be a new CPUC default rate tariff. "The concept is that everyone would go on a critical peak pricing rate but could opt out"--either beforehand or after a trial period?she said. The idea mirrors what was done in the telephone industry when local and long-distance services were split and consumers initially could choose to stick with AT&T as the default provider. "The trick is finding a tariff that works for all the different customer classes," Pfannenstiel said. Pacific Gas & Electric is considering installing up to 5 million meters, but is awaiting word back from vendors on the cost and complexity. The other two utilities are far less enthusiastic because of the cost. Labor unions oppose the hardware because of concerns it will reduce jobs. The day after the agencies met, the CPUC ordered investor-owned utilities to file applications by January 20, 2005, proposing new rate schedules for large customers who can cut their power demand at critical times. "Our goal in directing the filing of applications for a new default rate structure is to provide sufficient economic incentive to large customers to predictably and systematically move their usage out of the critical peak period, and if they do not do so, have them pay an increased rate for usage during that narrow set of hours," states the October 8 ruling by Peevey and administrative law judge Michelle Cooke. It also proposes reworking the rate for the large utility customers who agree to shut down during power shortages in return for lower rates. The possible change to interruptible programs concerns Rothrock because of its unknown impact. A CPUC decision on critical peak pricing is expected next month. It will include feedback from the interagency group made up of the three private utilities and the CPUC and CEC, known as Working Group 2, that is currently studying the issue. Peevey contrasted California's resistance to meters with Italy?s embrace of them. Nearly 20 million automated meters have been installed in Italy, at a cost of about $3 billion, with the goal being the installation of 30 million meters.

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Agencies Discuss Business Customers? Peak Price Underwriting

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