To peak, or not to peak?

Is time-of-use pricing making a difference?

Kate Rowland | Jul 26, 2012

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I spent last week in Toronto, and stopped in to see my mom in Ontario's lake cottage country last weekend on my way home.

Remember my mom? I first introduced you to her in March 2011 in my column "Time-of-use rates: boon to whom?" At that time, my parents were six months into a switch to time-of-use rates and monthly billing (from bi-monthly billing), and my mother was so far unimpressed with the entire situation. She was diligently doing her laundry, running her dishwasher and doing her ironing all during the off-peak period (at that time, between 9 p.m. and 7 a.m.), but not seeing much change in her bill as a result.

As we went through her bills back then, it was clear why her change in usage wasn't changing her bill. Remember, time-of-use billing affects only the electricity or commodity, cost. That's the charge for the electricity itself. Then there's the delivery charge. Add to that a regulatory charge (a percentage of electricity used) and a debt retirement charge (another percentage cost), and it was easy to see where the bulk of the bill was. It was in the line charges.

This visit, I didn't ask to see her bills, but of course, given my interest, the discussion drifted there all the same.

We talked about Saturday laundry and ironing, and we filled the dishwasher to capacity after a family Sunday brunch, but hadn't yet run it when I left for the airport at suppertime. (Weekends and holidays are always off-peak hours, at 6.5 cents/kWh, from Friday at 7 p.m. to Monday morning at 7 a.m.) I asked her how she was managing with regard to peak hours (in the summer, in Ontario, peak hours run from 11 a.m. to 5 p.m., at a rate of 11.7 cents/kWh), and she proudly announced that she was consistently keeping her peak billing hours at one kWh per month. Period.

She's hooked.

And she's not the only one. A CBC story earlier this month, "Why the power stayed on during Ontario's heat waves," noted that, while declining manufacturing in the province has reduced demand since they power peak heydays of 2006, in which Ontario struggled at times to keep the lights on, there are other reasons for the reduced demand, as well. One, the CBC said, was "power conservation measures that residents have adopted as well as incentives to use their dishwashers or washing machines at off-hours when the cost of electricity is lower."

Alexandra Campbell, a spokeswoman for Ontario's Independent Electricity System Operator, told the CBC that a lot of the shift in usage by residential customers was a shift to the weekends, when off-peak pricing is in effect all day long. "So where people can do laundry and other things on the weekend, they're doing that, but there's also people waiting until 7 o'clock before they plug in their phone to recharge it or have their shower or that kind of thing," she said.

Overall across the province of Ontario, peak demand for power consumption on extreme weather days has lessened by 2,500 MW to 3,000 MW, a considerable drop.

But it's not all cotton candy and puppies, daisies and kittens. There's no real way of deciphering how much of the lessening of peak demand is due to the loss of manufacturing facilities in Ontario, and how much is due to residential customers changing their usage patterns to take advantage of cheaper rates, according to Ontario's Independent Electricity System Operator.

In an article published in the IEEE Spectrum this month, "Smart conservation for the lazy consumer," authors Marc Mosko and Victoria Bellotti posit that efforts at time-of-use pricing by the Ontario Energy Board and others "have done little to alter usage patterns." Mosko and Bellotti cite Anthony Haines, Toronto Hydro Electric System's chief executive, saying he "believes that the savings are simply too modest. He thinks that peak electricity would have to cost 10 times as much as off-peak energy before utilities would move even 5 percent of their customers in the right direction."

If that's the case, then why are we doing it?

Are there analytics yet in place that can show, definitively, what benefits are being derived from time-of-use pricing?

I don't want to have to be the one to tell my mom that her energy-saving efforts were all for naught. She will not be a happy camper, believe me!

Kate Rowland
Editor-in-chief, Intelligent Utility magazine
krowland@energycentral.com

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Comments

I Agree With Kate

I'm totally onboard with Kate's last comment.

Richard Pate

I Agree With Kate

I'm absolutely onboard with Kate's last comment!

Richard Pate

TOU pricing and the smart grid

Hold the phone!

Let's not misinterpret my question, or presume that time-of-use pricing is the only reason for smart grid technology. That's decidedly not the case. Yes, I admit I am playing devil's advocate here for a moment, in questioning whether time-of-use pricing for residential customers is accomplishing the task it was set out to accomplish. But data may show us that it is. Smart meters (to use but one small piece of smart grid technology as an example) provide the data necessary for analytics programs to "crunch" to provide us with the answer to the question I posed.

You seem to suggest, if I am reading you correctly, that every bit of smart grid technology was deployed in order to launch time-of-use pricing. Not true. Smart grid technology is "enabling technology" in that it enables the electric utility industry to: a) increase reliability (be able to detect outages as they occur, without relying upon telephone calls from customers; b) better understand customer usage (whether that be commercial and industrial customers or residential customers) in order to better plan generation and/or purchased energy needs; c) automatically reroute electricity around an outage area, in order to return power to as many customers as possible while dispatching a repair crew to the affected area...etc. etc. etc. I could go on and on and on,  but these are a few top customer issues, and I think they paint the bare bones pretty well.

I am not questioning the need for smart grid technology. I welcome it. I am questioning, specifically, whether residential time-of-use pricing is working so far to gain the necessary cutbacks in electricity usage when and where it's needed. Period.

I'd be happy to debate this one further, if you'd like. I really appreciate your comment.

Kate Rowland

The Real Question Is Still To Be Answered Yet

This is a great practical article Kate.  It points out a question that I believe has not yet been answered.  Who is really causing the peak demand periods on the grid?  Many of the electric grids which have reduced industrial and commercial loads due to the recession seen to have avoided the demand issues predicted to happen.  This should cause one to stop and think about what is really causing the peak demand issues?

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Most peak demands happen in the early afternoons or early evenings during the weekdays.  Few happen during the weekend when most people are home and using more electricity.  This seems to point to industrial and commercial loads as a major source of heavy peak demands. 

 

Kate’s point of having to tell her mom that her energy saving efforts is having little effect will be a point of anger for more than just her mother.  Especially since many of the smart grid efforts have been sold as good for the residential customer and it needs to be supported and paid for by them. 

 

I want to make it clear that we are in an energy crisis and efforts to reduce waste are critical and worthwhile.  What end customers need is good information so they can understand their usage and good information on the causes and effects across the customer spectrum so that smart decisions can be made by all.  What Kate did with her mother is an exercise all customers should perform so they can understand their usage and make those smart decisions. 

 

Thanks Kate for the insight.

 

Richard G. Pate

Pate & Associates, Principal

rgpate@pateassociates.com

www.pateassociates.com

 

TOU pricing

I am pleasantly surprised at Kate's willingness to pose one of the most important questions about TOU pricing.  Kate points to something that so many of us intuitively know - consumers have only limited interest and/or willingness (if any at all) in changing their energy use behavior unless the reward is sufficiently large.  The value proposition for electricity is simply too great to bother with the inconvenience of load shifting ... unless the automation gear can do it without compromising lifestyle or that value proposition.  Consumers spend much more money on much lower value items every day.  Hopefully, Kate and this publication will move to one of the next major questions regarding TOU pricing ... the cost of the metering, communications, software, systems integration and gadgets in the home needed to enable TOU pricing and allow it to work for consumers without their constant, direct intervention.  And the logical follow-on step is to present an honest Benefit/Cost analysis ... and then revisit past pronouncements about how wonderful this piece of the Smart Grid really is (or is not).

TOU pricing

I am pleasantly surprised at Kate's willingness to pose one of the most important questions about TOU pricing.  Kate points to something that so many of us intuitively know - consumers have only limited interest and/or willingness (if any at all) in changing their energy use behavior unless the reward is sufficiently large.  The value proposition for electricity is simply too great to bother with the inconvenience of load shifting ... unless the automation gear can do it without compromising lifestyle or that value proposition.  Consumers spend much more money on much lower value items every day.  Hopefully, Kate and this publication will move to one of the next major questions regarding TOU pricing ... the cost of the metering, communications, software, systems integration and gadgets in the home needed to enable TOU pricing and allow it to work for consumers without their constant, direct intervention.  And the logical follow-on step is to present an honest Benefit/Cost analysis ... and then revisit past pronouncements about how wonderful this piece of the Smart Grid really is (or is not).