Smart Meters & Dynamic Pricing Not Synched

By Published On: November 20, 2009

Pricing schemes that reflect fluctuating energy prices to motivate ratepayers to lower their power use at peak times are expected to play a minor role in utility programs that won Department of Energy awards. Center stage for most California “smart meter” programs that landed $203 million in federal stimulus grants are massive increases in the flow of energy data between meters and utilities. Dynamic pricing was not one of the key selection criteria, Matt Rogers, DOE senior advisor, told Circuit. DOE awarded hundreds of millions of dollars in grants in late October, including to five municipal utilities in California and San Diego Gas & Electric, for so-called “smart” grid programs. The Sacramento Municipal Utility District is set to receive $127.5 million in federal stimulus money. Burbank Water & Power and Glendale Water & Power each won $20 million. San Diego Gas & Electric’s grant is for $28 million. Anaheim awaits $5.8 million and Modesto Irrigation District $1.49 million. Rogers noted that DOE hopes that state utilities, and the dozens of others that won a total of $3.4 billion for digitizing energy infrastructure to allow two-way communication--at the meter as well as along various points of the system--will help reveal which “combination of policy and resources in capital infrastructure deliver the most” in terms of energy savings. The utilities are to provide matching funds for their programs. Dynamic pricing involves the ability to charge consumers hourly or other time segmented rates for electricity in place of monthly bills lacking specifics. The concept is that if consumers know that they are turning on appliances or increasing consumption during times of high demand and cost, they would decrease their energy consumption. This in turn would avoid building new power plants and increase grid reliability. A number of energy economists and regulators, including California Energy commissioner Art Rosenfeld, see dynamic pricing as a sure way to lower rates and associated emissions by cluing ratepayers into the real cost of their energy use. A number of public and private utilities aren’t convinced. “We are sticking our toe in the [dynamic pricing] water,” said Jim Parks, SMUD manager of research and development. He said the muni had done some test runs and told DOE it would conduct dynamic pricing pilot tests. The test runs were on a small group of self-selected consumers, who made one thing clear, according to Parks: “Don’t mess with my TV or computer.” According to Fred Fletcher, power supply manager for Burbank Water & Power, dynamic pricing hasn’t been proven to lower energy usage and rates. “Pricing is psychological,” he said. Dynamic pricing proponents insist real time pricing is akin to price tags on food in grocery stores. It immediately informs customers about costs and they can respond in kind, including not buying a product or choosing a less expensive one. Dynamic pricing is critical to lowering energy consumption, said Skip Laitner, economist with the American Council for an Energy-Efficient Economy. He insisted that price be used as “information and not as a punishment.” Laitner also stressed during a talk on behavior and climate change November 12, that the focus of improved pricing information should be on “enabling consumers to become producers.” Anaheim is the sole grant recipient in California to have time-of-use pricing in place. Fletcher and others say the value in smart meters is opening the floodgates of supply and demand information. That in turn is expected to allow for quicker and more targeted responses to voltage swings, outages, help assess if and where energy efficiency programs are working, as well as reveal temperatures, occupancy, and other data impacting usage. Smart meters are “about reducing systemwide use at the utility end,” as well, said Kate Hora, Modesto Irrigation District spokesperson. According to Fletcher, smart meters will cause a 32,000-fold increase in energy data. He admitted managing all that data “will be challenging.” Craig Kuennen, Glendale smart meter project manager, said his agency committed to testing dynamic pricing but what the end program might entail--including whether time of use or critical peak pricing that has rates soar on a limited number of hot afternoons in the year and drop during off peak times--has yet to be determined. Any dynamic pricing program put in place would be voluntary, according to Kuennen. He believes outreach and education about clear variable pricing programs will draw customers, particularly the more digitally adept younger generation. Other munis also noted they were investing in pilot dynamic pricing schemes, which must be approved by their boards. SDG&E said it and the two other investor-owned utilities were looking into dynamic pricing programs with the California Public Utilities Commission. New legislation prohibits mandatory dynamic pricing for private utilities until 2014. In addition, SDG&E said its grant principally was for an umbrella system for its smart meter program.

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