Residential RealTime Pricing: From Pilot to Scale Lessons Learned

1
Residential Real-Time PricingFrom Pilot to
Scale Lessons Learned

• Anthony Star
• Director of Policy and Evaluation
• CNT Energy
• Public Utility Commission of Ohio
• Smart Meter Workshop 4
• Case No. 07-646-EL-UNC
• Columbus, Ohio, October 18, 2007

2
What is CNT Energy?

• Center for Neighborhood Technology is a 30
  year-old Chicago-based non-profit that works to
  build sustainable urban communities through
  research, advocacy and program implementation
• From 2000 through 2007 operated place-based
  demand response programs and piloted residential
  real-time pricing under the Community Energy
  Cooperative moniker. Changed name to CNT Energy
  this summer
• CNT ran large energy efficiency rehab programs
  during the 1980s
• Other programs include I-Go car sharing, Location
  Efficient Mortgage, Equity Express, Climate
  Change Analysis

3
The Problem

• 95 of all customers residential, small
  commercial, municipal have absolutely no idea
  that the price of electricity varies by the hour
  and that the average of the hourly prices is
  likely to be significantly lower than the hedged
  retail price they have traditionally seen. And
  until they know that, they wont realize that
  there is something in it directly for them that
  investing in smart meters will give them access
  to lower cost electricity.
• Testimony of Illinois Commerce Commission
  Commissioner Bob Lieberman to the Sub-committee
  on Energy and Air Quality, Committee on Energy
  and Commerce, U.S. House of Representatives. May
  3, 2007.

4
Every Financial Planner Will ShowYou This
Risk/Return Graph
http//www.calvert.com/images/new_balancingrisk.gi
f
5
Why Not Have the Same for Electric Rates?

• Real-Time Pricing
• Critical Peak Pricing
• Time-of-Use Pricing
• Flat Rate
• Flat Bills

6
Whats Keeping Us From Having Those Options?

• To have an appropriate risk/reward scale requires
  the ability to differentiate supply and demand
• Supply The emergence of wholesale markets allows
  for price discovery at the hourly level
• Demand The individual load shape
• now matters, not just total usage

The culprit for creating bad load shapes
7
The Meter Has Been The Barrier

• Since before 1900, the best measuring device
  available
• Inexpensive, long lasting but limited

8
Connecting The Pieces

• Interval metering allows for the creation of
  individual load shapes
• Time-of-Use and Critical Peak Pricing address
  creating value on the demand side, but not on the
  supply side
• Wholesale markets create a transparent set of
  prices that with good rate design create value
  for RTP
• Consumer behavior changes can change load shapes,
  but we need to think about automated controls
  (e.g., smart thermostats) as well to maximize the
  potential of smart meters

9
What We Have Learned About Residential RTP So
Far?

• Four years of Energy-Smart Pricing Plan pilot
  program results have demonstrated
• Good demand response (15 to 20 cuts in peak
  demand)
• Increased energy efficiency
• Bill savings (10) and strong customer
  interest/satisfaction
• Value to a range of customer types
• The next step is to understand how widespread RTP
  can transform markets
• In Illinois we are exploring if residential RTP
  will
• Lower prices for everyone?
• Create meaningful customer choice?
• Develop a platform for technological innovation
  to encourage conservation and efficiency?

10
Energy-Smart Pricing Plan Pilot Program
(2003-2006) Key Details

• Energy unbundled from distribution and
  transmission
• Consumers paid hourly, market-based prices (pass
  through of PJM hourly price)
• Interval meters, read by traditional meter
  readers
• We provided an intermediary
• role providing outreach, consumer
• education, high price notifications,
• ComEd remained the supplier
• and billed the participant

11
Energy-Smart Pricing Plan Participant Demographics

• Over 1,500 enrollments over life of pilot program
• Diversity across race and income
• Housing Types
• 85 Single
• 15 Family Multi Family
• Location
• 38 Chicago
• 62 Suburban
• Air Conditioning
• 52 Central
• 40 Window
• 8 None

12
Its More Than Just A Rate Helping Consumers
Manage Prices

• Information about hourly energy prices
• Education about general price shapes by season
• Access to daily prices via a website or phone
  number
• Notification of high price days (over 13
  cents/kWh)
• By telephone or e-mail, issued the previous
  evening
• Access to web-based tools to view charts and
  graphs of energy use, price and cost down to the
  hourly level
• Online and printed summaries of energy use, costs
  and comparable flat rate bills
• Educational materials on energy efficiency and
  how to reduce usage during peak times
• These tools can create changes in behavior

13
ESPP Saw Variety of Prices, Weather
14
ESPP Bill Impacts
Consistently high retention rate, even in 2005,
despite a very hot summer, and high power prices
driven by natural gas costs (Does not include
participants who moved during the year)
15
How Community Demographics Impact Results
16
Residential RTP Creates More Efficient Customers

• Evaluations show
• Participants in real-time pricing cut summer
  usage 3 to 4 percent
• Are more likely to buy Energy Star appliances
• Feel more knowledgeable about their energy use
  and feel more able to control it
• Lower income households were more responsive to
  price signals than higher income households

17
Peak Demand Reductions from Residential RTP
RTP without enabling technology RTP with air
conditioner cycling
100 AM
700 AM
100 PM
700 PM
18
Customers Like Real-Time Pricing
19
Reducing Demand Doesnt Strain Participants
20
Conclusions From Pilot Program

• RTP can be successfully implemented with
  relatively inexpensive incremental technology
• Useful, reliable pricing information is critical
  component
• Creates a real opportunity for energy awareness
  messages
• Consumer education is needed (want and use energy
  information relevant to their situation)
• High price notifications focus peoples attention
• An automatic curtailment option such as an air
  conditioner cycling switch or a smart thermostat
  produces added benefits

21
Gauging Customer Interest in Real-time Pricing
Would You Be Interested In A Fixed Or Variable
Rate Plan?
Summer 2006 Survey. 282 ComEd, 399 Ameren
households
22
Illinois Legislators and Consumer Advocates
Supported Expansion of Residential RTP

• This just seems to make eminent sense to me--
  if you're in a position where you can hold out in
  the heat of the day and run your air conditioner
  at night, you're gonna save some money.
• Representative William Black (R-Danville) during
  floor debate on SB1705, April 4, 2006
• CUB views Amerens Tariff as a necessary and
  important step toward the development of
  substantial demand response that can provide the
  discipline lacking in the markets today.
• Testimony of Chris Thomas of the Citizens Utility
  Board in support of Amerens rate filing in
  Docket 06-0691 (cons.), December 4, 2006

23
The Grand Experiment

• In examining economic benefits from demand
  reductions, the Commission shall, at a minimum,
  consider the following
• improvements to system reliability and power
  quality,
• reduction in wholesale market prices and price
  volatility,
• electric utility cost avoidance and reductions,
• market power mitigation, and
• other benefits of demand reductions,
• but only to the extent that the effects of
  reduced demand can be demonstrated to lower the
  cost of electricity delivered to residential
  customers.
• Public Act 94-0977, Sect 16-107

24
Potential Annual Benefits
80

• Assumes 10 of residential customers participate.
  
• Program cost approximately 16 million per year
• (including metering using todays technologies
  and costs)

85 increase
CI Customer Benefits
70
over mid case
Other Residential Benefits
60
RTP Participants
112 increase
over mid case
50
(Millions per Year)
40
178 increase
30
239 increase
over mid case
over base case
121 increase
20
over base case
3 increase
10
over base case
Adapted from CUB/City of Chicago Exhibit 3.5,
Testimony of Bernie Neenan in ICC Docket 06-0617
0
Base Case
Mid Case
High Case
Weighted Average
25
Can Residential RTP Benefit Everyone?
Increasing level of demand response benefits
non-participants more than participants!
Adapted from CUB/City of Chicago Exhibit 3.6,
Testimony of Bernie Neenan in ICC Docket 06-0617
26
2007 Full Scale RTP Programs Roll Out

• Power Smart Pricing for Ameren Illinois customers
• The Wattspot for ComEd customers
• Debate over new retail rates only settled in
  August. Over half the year lost to legislative
  uncertainty
• Goals are to enroll 3 of customers over next
  four years and then evaluate programs to see if
  they generate net benefits
• Smart meters not yet part of the story

27
Power Smart Pricing
28
Power Smart Pricing Details

• Rider PSP adds on to Amerens Rider RTP to create
  an optional program for residential customers.
• 2.25 per month fee to cover part of the cost of
  metering and program administration (compared to
  5/month for just Rider RTP)
• Initial 12 month stay required
• CNT Energys role as Program Administrator is to
  provide
• Outreach/program marketing
• Education tools for both efficiency and peak
  demand management
• High price notifications
• Online tools
• Research and evaluation

29
Both Everyday and High Price Tips
30
Marketing Plans

• Full scale marketing has just begun to largest
  communities in Amerens service territory
• Direct mail
• Media outreach
• Advertising
• Partnering with local community organizations
• Bill insert in November to all Ameren residential
  customers
• Recent ICC ruling on rate redesign for electric
  space heat customers recreates a subsidy for them
  that will likely be a better deal than Power
  Smart Pricing

31
Technology Roll-out

• New website www.powersmartpricing.org launched in
  early March
• Nexus Energy Software developed new online
  functionality including
• Energy audit
• Sophisticated usage and price graphs and analysis
  tools
• Bill comparisons
• Customized emails for high price notification and
  new bills

32
Enhanced Online Experience
Examples of Nexus web based software displays
33
Leveraging TechnologyComverges WattSpot
Program for ComEd
34
Lessons Learned

• There is a segment of consumers who will respond
  to price signals
• Small changes at peak times can have big impacts
• Technologies to manage energy use are both soft
  (web, education) and hard (cycling switches)
• The challenges ahead
• What is the potential market?
• Will regulatory climates tolerate exposing some
  customers to more risk in exchange for more
  potential rewards?
• Can residential real-time pricing inform the
  debates on smart metering?

35
What Could Come Next

• Changing peoples behavior and awareness opens
  them up to interest in
• Innovative information communications systems
• New homes with enabling technology built in
• Grid friendly appliances

PriceLight Engages Consumers
The home as a generator Participate in the market
New Technology Automates efficiency
36
Getting Past the Smart Meter Debate

• A meter just provides measured information
• The challenge is what do you do with that
  information?

• Smart Meters Dumb Rates A wasted opportunity
• Smart Meter Smart Rates Smart Technologies
• Value to Consumers, The Electric Grid and the
  Environment

37
For More Information

• Anthony Star
• Director of Policy and Evaluation
• astar_at_cntenergy.org
• 773/269-4017
• CNT Energy
• 2125 West North Avenue
• Chicago, IL 60647
• www.cntenergy.org