The consumer, loose in the blogosphere

Phil Carson | Mar 04, 2010

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Well, we're rolling into the weekend and I thought it might be fun to take a serious topic and provide some potentially comic relief.

The serious topic is demand side management and tiered pricing by utilities to move the needle on consumer behavior for shaving peak load to meet demand without new power generation. Specifically, Xcel Energy in Colorado, my utility and home state, won regulatory approval this week to introduce a two-tier rate system.

This was covered in yesterday's The Denver Post and the resulting comments on the article's forum were enlightening - at least in the sense that these are real people sharing their thoughts and feelings. Many of the comments underscored the smart grid mantra that consumer engagement is a critical element as Xcel and others take steps to implement new technologies, processes and, in today's example, pricing schemes. 

On the "potential comic relief" I claim to offer, I'm going to try an experiment. The Denver Post's news article on this two-tiered rate appeared yesterday at 4 a.m. The comments on the accompanying forum began to roll in about 4:40 a.m. and continued to roll in as I typed the first paragraphs of this column. The "potential" part of the "comic relief" stems from the fact that I truly did not ascertain ahead of time what I'd encounter. But I trusted that, somehow, the comments and exchanges would reflect a gamut of perspectives that could offer insight and, I hoped, some laughs.

First, the setup:

From June to September - the peak air conditioning months - Xcel will charge a cheaper rate for the first 500 kilowatt hours (kWh) usage per month and a higher rate for all usage above that amount. The thinking, of course, is that folks who run their air conditioners during peak hours in summer should pay the higher cost of that more expensive electricity. Not all details are known yet, but the spread between the two rates is thought to be about three cents per kWh, according to the Colorado Office of Consumer Counsel. The Public Utilities Commission estimated that the average resident would pay about two percent more in the four summer months and five percent less in each of the remaining eight months of the year. 

So, forthwith, I'm simply scrolling through the posts and quoting a few remarks here, as space allows. (I'm editing for brevity and cogency.)

4:20 a.m. "This is way better than an across-the-board increase. At least the first 500 kWh are cheapest."

6:25 a.m. "Trust me, Xcel is NOT trying to help the customer! They would NOT do this for that reason. This is one way to get more in the long run."

7:03 a.m. "Charging a tiered rate? How is this remotely constitutional? Name any other item you buy in bulk where it costs you more?!"

7:28 a.m. "Actually, providing the last, marginal peak kWhs costs a lot more than delivering base load. Therefore it makes sense to charge more for heavy users."

8:05 a.m. "Sounds eerily similar to a progressive income tax."

8:07 a.m. "In most (Colorado) houses, air conditioning isn't needed. Evaporative cooling does a great job. Foolish people who install air conditioning will pay extra for that dumb decision."

8:09 a.m. "Is this just another tax on the medical marijuana industry?"

8:13 a.m. "I will just stop paying my bill until they turn me off! More taxation without representation."

8:14 a.m. "Green Nazis strike again."

8:18 a.m. "The new rule should put a major dent in the sales of electric cars. They want everybody to purchase foreign oil and keep the terrorists supplied with cash. Wonderful!"

9:16 a.m. "(Somebody) must live in the mountains. Denver gets blazing hot in the summer. There is no way to sleep without air conditioning. Where are we supposed to get the money for a swamp cooler?"

9:28 a.m. "Many of us don't like the idea of smelling swamp water in our houses."

9:40 a.m. "A 'swamp water smell'? Sorry, I'd be getting into a war of wits with an unarmed adversary if I were to engage you."

Well, folks, might as well cap it here as the fratricide begins. By the way, this takes place in the Post's "Neighbors Community Forum" - a warm and fuzzy place.

If you really want more, check out the forum here. I'm pretty sure this group, like many public forums, is not directly representational of the public at large. So, clearly, I had some fun with it. But it occurs to me that Xcel might want to consider the "street team" concept and get in touch with their ally, the person who posted at 7:28 a.m. Because our local utility may need a hand.

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757

 

 

 

 

 

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Comments

Seriously now, folks

A reader, who wished to remain anonymous due to professional commitments, had this to say about tiered pricing:

It doesn't work. Our reader said the one study on the topic concluded it had negligile impacts on demand. (I just heard back that that study remains under wraps due to confidential utility data in it.)

"Tiered rates don't work to reduce peak load because they don't differentiate by time of use; the same incentive to cut use exists at 3 p.m. or 3 a.m."

"If customers shift their usage to off-peak hours, say, charging an electric vehicle at night, they get ******* because they are charged for total usage, not time-of-use."

 

I expect more from this forum

Phil,

I'm afraid that your column actually does the topic and the many people who wrote in to the Denver Post an injustice.  It's a serious topic and those who complain about the tiered rate schedule are not all wrong, even though some may not artfully express their dissatisfaction.  I agree with the sentiment that those who impose the greatest load during peak times should perhaps shoulder the greater incremental cost.  But, if the average use is, as PSCo noted, 657 kWh per month, then the 500 kWh threshold seems exceedingly low.  Does that imply that the average user is wasteful? What about the unfortunate person who is on an oxygen generator that by itself consumes over 300 kWh per month? Or the person who installed a ground source heat pump in the name of efficiency and is now being penalized because those systems run much more often.  And, those respondents who noted that Denver water users were so successful in heeding the Water Board's call for conservation that rates had to increase because revenues fell so drastically expressed a very valid concern.  So much for the argument about efficiency saving consumers money.  The same could easily happen here.

From a societal standpoint, I am not convinced that average rates (what we have traditionally had) are not in the best interests of the community as a whole.  After all, we're not talking about a luxury here but a necessity.  And, that is why the monopolist is regulated.  If you want to place a luxury tax on the commodity, then increase the threshold for the more expensive tier to something that is truly reflective of luxury use rather than necessary use.  If we want to fiddle with rates to promote conservation, then TOU rates would be better than the simple two-tier rate that does not provide sufficient discrimination between uses.  That would allow many of the consumers who have a valid use to at least shift it to lower cost times.  We need a tool that can be applied with more precision than a sledge hammer.

Keep your sense of humor

Richard,

One has to relax and have a chuckle now and then.

Upon re-reading the column, I think we did a good job of delivering a little humor on what is clearly stated to be a serious topic.

To your point, the Xcel two-tier rates for June-September don't seem very targeted at peak loads, just aggregate demand by individual users. I sense, but do not know, that Xcel will seek to connect the dots with its ratepayers that summer peak loads are associated with air conditioner and pool pump use.

Of course monolithic policies such as this one fall unevenly on the varied and disparate lifestyles of ratepayers. That remains a problem for all utilities.

As to Jack's remark below, I think he "got" the column - we're not banging on Xcel so much as making the point that consumers in general don't understand electricity generation, transmission and distribution and the high cost of meeting infrequent peak loads.

But you can expect me to take the humorous approach to serious issues on a regular basis. That's my approach to life and a key to a resilient heart and mind in a complex world over-filled with serious issues.

I do not underestimate, as Jack suggested, that this snippet from The Denver Post's forum is in fact representational of Denver residents' level of knowledge and degree of paranoia about their utility's motives. That, indeed, was the point. If we meant to disrespect contributors to the Post's forum, we would have named them. We did not.

Stay loose, Phil

A little humor...

OK, I can go with the little humor approach... it was only a little.  Frankly, I am not banging on the utility so much as I am on the PUC itself (you may need to find me a new job after this one).  The motivations of the investor owned utility are clear.  It is the political motivation of appointed officials and the self serving advocacy of special interest groups I quarrel with which do not, in my humble opinion square with the public interest.

Education

"I'm pretty sure this group, like many public forums, is not directly representational of the public at large."

Phil, you might be (unpleasantly) surprised.

I think there are a couple of reasons why at least a segment of the public believes "someone is out to get them", for lack of a better phrase. 

First, I think there's a lot of resentment over the monopoly role of utilities.  Few customers might switch away, but consumers are used to having alternatives. 

Second, regulators have set expectations that customers will be "protected" from high prices. 

Third, for some reason elected leaders tend to intervene in matters related to electricity more than any other good or service we buy on a regular basis.  This tends to reinforce the idea that consumers are somehow entitled to inexpensive power. 

Even though it's likely to make them highly unpopular, regulators need to be out in front explaining why prices are set the way they are, and in a venue other than the dry, jargon-filled hearing room.

 

Ha Ha Ha - it's a barrel of laughs...

You guys can laugh at all the backwater fly-over doofuses if you want... People understand what happens... yeah, it's just like the progressive income tax... Woodrow Wilson introduced our income tax of 3% and 7% (on the rich) and promised is would NEVER go over these amounts... 10 years later the top marginal rate was ov 70%...

So, you can crack a smile but we know the game... oh, and btw, what will the rate be once Cap N Tax or a straight carbon tax is implemented? hmmm?

Jake