Price debate

California pushes forward, but are consumers ready?

Published In: Intelligent Utility Magazine May/June 2010


THE OLD ADAGE THAT RESIDENTIAL consumers don't truly understand electricity pricing has come back to haunt electric utilities as they begin to introduce smart metering and dynamic pricing. Reliability, on the other hand, is a concept consumers have no trouble getting their heads around. The trouble, to date, seems to be the ability to interrelate the two. In fact, consumer acceptance and adoption are among the top challenges intelligent utilities currently face with regard to smart grid initiatives.

California turns to economic incentives

In California, where recent consumer pushback has been both vocal and litigious, the California Public Utilities Commission (CPUC) is moving to establish dynamic electricity prices for the entire state, including residential consumers as well as commercial, industrial and agricultural customers.

In a concerted effort to move in this direction, the CPUC recently approved new rate structures for Pacific Gas & Electric Co.'s (PG&E) commercial, industrial and agricultural customers. The new dynamic pricing scheme will charge varying rates for peak and non-peak times, with an initial opt-out option for the approximately 12 peak-day events.

Customers will be given one-day notification of these events, so they can plan to switch electrical usage. All customers using peak-day pricing rates will be given bill stabilization for the first year, as well as a hedging option to reduce bill volatility.

On May 1, PG&E's large commercial and industrial customers were automatically switched to the dynamic pricing scheme, unless they proactively chose to opt out. Small and medium commercial and industrial customers default to the peak-day pricing plan beginning Nov. 1, 2011.

Michael R. Peevy, CPUC's president, feels this move will increase customer involvement. ''By providing real economic incentives to reduce electric demand during peak periods, we can increase customer involvement in managing California's energy supply, reduce greenhouse gas emissions, and manage future power plant development costs,'' he said.

In agreeing to the new rates, the CPUC also ordered PG&E to conduct outreach and education activities and measures to ensure that customers are aware of and understand the new rates and options.

Education remains essential

In the face of vocal residential pushback and more than 600 complaints to the CPUC-mostly from the PG&E service area-the commission at the end of March selected an independent evaluator to test and validate meter billing and accuracy of PG&E's smart meters.

Andrew Tang, PG&E's senior director of customer care, welcomed the independent evaluation. ''We continue to wholeheartedly support the CPUC's independent third-party evaluation,'' he said, and added that the utility is committed to its customers, and is continuing its education efforts around the benefits of its SmartMeter technology.

''As with any initiative rollout of this magnitude, one would expect to run into challenges, whether physical, technological, customer acceptance or human error,'' he added. ''As we address those challenges, we will identify any issues and make them right with our customers. When customers have questions about their meters or bills, we will work with them to address their questions.''

Consumer engagement is key

As California continues moving along its intended path to establish dynamic pricing statewide, the CPUC has also requested commentary on the state's smart grid deployment plans, and the best methods for providing access to electricity prices and usage.

And what it is hearing so far reflects current industry thought on the ability for utilities to engage their consumers. As one company focusing its efforts on consumer-driven energy management and efficiency wrote in its submission to the CPUC: ''[We] argue that consumer engagement is fundamental to the next generation of energy efficiency and demand response applications, particularly in a smart grid environment.''

But price of electricity alone may not completely engage the consumer to change behavior, which is one of California's goals in its dynamic pricing plan. It continued: ''Price as a lone motivator may overlook the significant potential of other factors, such as improving the environment, competition, cooperation, peer comparisons, learning and recognition and rewards.''

Answers uncertain

Clearly, the answer to full consumer engagement is out there. Whether dynamic pricing alone will be enough to facilitate the necessary change in electricity usage behavior remains to be seen.


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