TOU, prepay: they work

Lessons learned on voluntary programs in Phoenix

Phil Carson | Jun 27, 2012

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Sometimes one gets the impression that empowering the consumer is a lot like the weather. Everybody's talking about it, but nobody's doing anything about it. 

Fortunately, as we know, that's not so. One ongoing, practical effort is the work being done by the Association for Demand Response + Smart Grid (ADS), meeting this week in Washington, D.C. For the meeting agenda click on the group's title. Dan Delurey, executive director, is focused on impacting utility policies and practices for all the right reasons we've discussed these past years: energy efficiency, rational capital investment, environmental stewardship, the list is long. (And, seemingly, Delurey never forgets a name and a face.) 

The ADS' new case study, "Salt River Project: The Persistence of Consumer Choice," spreads the word on the successes in consumer choice by the Phoenix-based utility. (Click on the title to read or download the 16-pager.) The case study was authored by Judith Schwartz, principal at To the Point, who has written several key industry reports over the past two years. 

(The other major case study performed by ADS, focused on the PowerCentsDC project, which last year offered many insights on involving stakeholders to ensure that grid innovations could benefit low-income utility customers. See "PowerCentsDC: A Model for Stakeholder Collaboration."

Whether you've followed Salt River Project (SRP) or not, I urge you to read this succinct new report. I'll just provide a few highlights to tip you off to the contents. 

First, SRP was selected as a case study for a handful of very good reasons:

 

  • SRP, a municipal utility, has pioneered time-based pricing and prepay for more than 30 years;
  • Offering consumer choice is part of the utility's culture;
  • Other utilities can take lessons learned at SRP and apply them, based on the established link between customer choice and satisfaction; 
  • Smart meters are helping evolve SRP's established customer choice programs;
  • By May, SRP had installed smart meters in 86 percent of its customers' homes in the Phoenix metro area.

 

Let's go to a few of those lessons learned. When you read them, I think you too may have an "aha moment," as I did.

 

  • Make programs voluntary; that is, opt-in. And allow customers to reverse their decision.
  • Offer pricing programs that can be graphically illustrated for comparison's sake and structure them to fit customers' schedules. 
  • Prepay can benefit a wide swath of customers, so don't limit such programs to customers with credit issues. And don't apply service charges to payments. 
  • Help steer customers to the programs that best serve them and provide tools and customer service that can deliver secure, account-specific comparisons. 
  • Program benefits can be enhanced by interval meters. 

 

My own view of prepay has evolved. Initially, I thought the language around it smacked of utility-speak, masking advantages to the utility and disadvantages to the customer. But making prepay opt-in definitely offers an alternative to month-end surprises that can roll up into significant arrears. That means customers have the opportunity to set a budget and the motivation to meet it. And if they don't do well with that responsibility they can change their mind and opt-out. For utilities, those arrears often go unpaid. Limiting them improves cash flow. 

To close this piece, I'll just cherry pick a couple quotes from the report on time-of-use rates and let you have a read on your own.

In contrast to the blather you hear about time-based pricing being a way for utilities to gouge customers when they need peak-time air-conditioning in summer, for instance, or the other canard, that TOU rates mean doing your laundry at midnight, listen to Mike Lowe, associate general manager and chief customer executive.

"We have had residential time-of-use as an option - and it is an option - since 1980," Lowe said. "Today we have 22 percent of our residential customers on our seasonal Time-of-Use plan with a seven-hour window and another 6 percent on `EZ-3' (3-6 p.m., M-F, all year).

"Customers who have been on these rate plans for any time at all are very adept at shifting their load. They don't run the dishwasher of the pool pump on peak. They set their air conditioner a little higher on peak. TOU customers typically have programmable thermostats for their air conditioners and timers on their water heaters and pool pumps." 

In short, you can bray all day long about doom-and-gloom, but the reality is: these voluntary programs work and they provide the degree of demand management that benefits the utility, keeping a lid on overall costs for SRP. And customers are more satisfied as they gain more control over their usage and resulting bills. 

Bravo!

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

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Comments

Do They Work?

From the article: "....these voluntary programs work...".

What are the metrics used to measure "success"? An opt in statistic of 28% doesn't seem all that impressive and in any case, without knowing the tradeoffs, the benefits and to which counterparty they accrue the notion that the program "works" is merely subjective.

Here's Mike Lowe's initial response from Salt River Project

Mike Lowe, associate general manager and chief customer executive at Salt River Project, provided a quick response to your query. We'll speak with Lowe soon and provide more detail. Lowe writes in response to your specific question on "success":

"Our customers define success for us.  Over 250,000 have voluntarily elected time-of-day pricing programs, enjoy typical annual bill savings between 4 and 8 percent, and are committed to reducing their energy consumption during our peak, which is from about 3 p.m. to 6 p.m. weekdays. 

"During our 110+ degree, summer days, that’s crucial to our operations.  Because of their commitment, we are able to provide reliable power to all of our customers utilizing fewer resources.   That certainly seems to us like a win for everyone – SRP, our customers on time-of-day programs, and all of our other customers. 

"Over 130,000 of our customers have elected prepay, are realizing a 12 percent reduction in monthly energy consumption, and never incur late fees or disconnection charges. 

"Here’s what our prepay customers are telling us:

·         97% believe that our prepay program could help a lot of people.

 ·         94% agree that with our prepay program they use electricity more wisely.

 ·         88% prefer our prepay program over a monthly bill.

 ·         87% tell us that the program has helped them to manage their finances. 

 

Both of these programs, time-of-day and prepay, are clearly rewarding to our customers. 

Michael Lowe
Associate General Manager & Chief Customer Executive
Salt River Project

 

Make me smile!

Ah, the power of positive thinking! Thanks for making me smile. 

Let 's put the question to Mike Lowe at SRP and see what his answer is. 

My answer: For customer who opt-in, third-parties have verified high customer satisfaction. So if a utility offers a program that results in high customer satisfaction, feel free to play with semantics. I'll call it successful and keep up the effort. (That number, BTW, is 22 percent, not 28 percent.) 

The other side, of course, is what this 22 percent level of involvement does for the utility. I can't cite chapter and verse, but in the demand management world, if a slice of your customers incrementally back off peak use, that's often the margin you need to operate with adequate capacity in place. For the details on that, as well as the possible deferment of capital investment in peaking plants, I'll forward this to SRP for definitive metrics.

Meanwhile, a program that runs 32 years and is examined as a national model isn't likely to be some sort of flim-flam. Let's get details and lay it on the line.

Regards, Phil Carson  


Learning peak hours

Phil, for DOE Green Button contest I created PeakTweak application (http://appsforenergy.challenge.gov/submissions/8003-peaktweak). This application was not awarded in this contest but PeakTweak idea works even without Green Button and can help as preparation to voluntary TOU. The idea is simple, compare % of usage during peak hours, so everyone can be involved. I agree with SRP conclusions, but some simple ideas such as PeakTweak can help with introducing TOU.

Regards,

JacekS

Ping me

JacekS,

Feel free to shoot me an email and we can chat about your app. Sounds interesting. 

Regards, Phil Carson