T&D World Magazine

District Customers Respond to Smart Grid Pricing

Results from a smart metering pilot in Washington, D.C., demonstrate that residential consumers in the nation’s capital consistently respond to variable electricity prices, according to a report. The PowerCentsDC pilot tested behavior of Pepco customers who were offered different rate designs facilitated by “smart” meters and found that, participants saved money and reduced their summer peak electricity demands when given a price signal.

Similar advanced meters and related “smart grid” technologies will be installed throughout Pepco’s District of Columbia service territory before the end of 2011, opening the way for all District customers to better manage their energy bills.

The PowerCentsDC pilot sponsored by the non-profit Smart Meter Pilot Program, Inc. (SMPPI) has received national attention for its approach to testing so-called “dynamic pricing” and the diverse group of stakeholders overseeing the pilot. SMPPI is comprised of Pepco, the D.C. Office of the People’s Counsel (OPC), the D.C. Consumer Utility Board (CUB), the International Brotherhood of Electrical Workers (IBEW) Local 1900, and the D.C. Public Service Commission (PSC).

PowerCentsDC was the first pilot in the nation to test the advanced metering with three different pricing plans. SMPPI received the “Best Pricing and Demand Response Program” award for 2010 from the Association for Energy Services Professionals (AESP) for PowerCentsDC.

The pilot’s strongest customer response was attributed to “critical peak pricing” (CPP), whereby prices increased five-fold for about 60 hours per year with power discounted slightly during the remainder of the year. Other PowerCentsDC pricing plans included prices that vary hourly throughout the year (“hourly pricing”) and offering rebates to customers who curb usage during peak events (“critical peak rebate”).

“PowerCentsDC proves that the Smart Grid can deliver solid benefits to all consumers, regardless of income level,” noted Dr. George W. Arnold, who is the Obama Administration’s National Coordinator for Smart Grid Interoperability. “The results of this pilot are helping our national efforts on the Smart Grid to learn from best practices.”

More than 90 percent of all participants saved money through PowerCentsDC rates, according to SMPPI. Low-income customers, who were explicitly recruited for the pilot, saved money overall and were found to respond to dynamic pricing at nearly the same level as other residential customers. Furthermore, a large majority of participants, when asked, said they preferred the variable PowerCentsDC rates to the conventional flat rates that Pepco has historically charged its customers on a monthly basis.

“As customers continue to be challenged by managing costs associated with energy usage, PowerCentsDC demonstrates that additional information can help customers reduce electricity usage and lower their bills,” said Charles Dickerson, Vice President of Customer Care at Pepco Holdings, Inc., the parent company of Pepco. “Implementing this technology widely will help to lower regional electricity prices during peak demand periods.”

Customer responses to dynamic prices were enhanced by “enabling technologies” such as smart thermostats (provided free to a subset of PowerCentsDC participants), as well as by energy information and feedback provided to all participants. Peak reductions in summer were greater than in winter and, in most cases, higher summer temperatures produced even greater peak demand reductions. The results are generally consistent with those of other dynamic pricing pilots, according to SMPPI’s PowerCentsDC Final Report.

“Results from PowerCentsDC will help to inform the District’s policymakers as we move forward with smart grid technology,” said Rick Morgan, commissioner of the D.C. Public Service Commission. “With Pepco’s ongoing deployment of advanced metering, the Nation’s Capital is poised to be among the first jurisdictions in the country to put smart meters to work helping consumers.”

The pilot project, conceived by OPC and funded by $2 million from Pepco included about 900 randomly selected District residents representing all eight city wards. “The PowerCentsDC pilot clearly demonstrated that providing consumers with detailed information about their energy usage and enabling technology can empower them to reduce their energy consumption,” said Brenda Pennington, Interim People’s Counsel. “The pilot also is a useful example to other jurisdictions as to how to conduct a dynamic pricing pilot program.”

“The true success of the PowerCentsDC pilot is the validation that consumers across socio-economic classes will conserve electric energy if given the tools. The results of the pilot program are encouraging with smart metering and dynamic pricing potentially providing District consumer’s two additional tools to control their cost and consumption,” said Herbert Harris Jr., Chairman, Consumer Utility Board.

“I feel that the partnership that was formed with an organized labor union (IBEW), utility company (Pepco), local public service officials (DC PSC and DC OPC) together with other independent agencies was one of the key factors that made this pilot a success and I encourage others to take the same approach," said John L. Holt, President and Business Manager of IBEW Local 1900.

“PowerCentsDC not only reinforces results from many other Smart Grid pilot programs across the country, but presents new and compelling data on just how much consumers can save on their bills when empowered with dynamic pricing, automated control, and smart energy information feedback,” said Chris King, Chief Regulatory Officer for eMeter Strategic Consulting, who managed the pilot along with project manager Patti Harper-Slaboszewicz, now with Bass / a CSC company..

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