Time of Use Rates: An International Perspectives

Time-of-Use (TOU) rates, sometimes also called Time-Varying Rates (TVR), include simple time-of-use rates, critical-peak pricing rates, peak time rebates (PTR), variable-peak pricing rates (VPP) and real-time pricing rates (RTP). Today, they are deployed in small numbers in many parts of the globe.

Figure 1 presents a summary:

Figure 1: TVR Deployments throughout the Globe

Type of Rate Applicability Participating Customers**
Canada (Ontario) Time-of-Use (TOU) Default 90% (3.6 million)
France Time-of-Use (TOU) Opt-in 50%
Great Britain Time-of-Use (TOU) Opt-in 13% (3.5 million)
Hong Kong (CLP Power Limited) Peak Time Rebate (PTR) Opt-in 27,000
Italy Time-of-Use (TOU) Default 75-90%**
Spain Real-Time Pricing (RTP) Default 40%
Arizona (APS, SRP) Time-of-Use (TOU) Opt-in APS: 57%, SRP: 36%
California (PG&E, SCE, SDG&E) Time-of-Use (TOU) Default (2020) TBD – 75-90%**
California (SMUD) Time-of-Use (TOU) Default 75-90%**
Colorado (Fort Collins) Time-of-Use (TOU) Mandatory 100%
Illinois (ComEd, Ameren IL) Real-Time Pricing (RTP) Opt-in 50,000
Maryland (BGE, Pepco, Delmarva) Peak Time Rebate (PTR) Default 80%
Michigan (Consumers Energy) Time-of-Use (TOU) Default (2020) TBD – 75-90%**
Oklahoma (OG&E) Variable-Peak Pricing (VPP) Opt-in 20% (130,000)

 

Despite this widespread deployment, there is tremendous room for growth. The deployment of Advanced Metering Infrastructure (AMI) is creating an opportunity to enhance customer engagement by deploying TVRs and harness the load flexibility benefits created by these rates.[1] By the end of 2020, nearly 100 million smart meters are expected to be deployed in the US, representing nearly 85 per cent of households.[2] At the same time, the deployment of TOU rates is limited to 4 per cent.

By comparison, in Ontario, Canada, TVRs (simple three-period TOU rates) are deployed to all residential and small commercial and industrial customers as the default, regulated pricing option, and 90 per cent are taking service on TVRs.

Figure 2: Price Responsiveness with and without Emerging Technology[3]

As shown in Figure 2, the magnitude of demand response varies by the peak to off-peak price ratio. Based on regression analysis of over 60 time-varying pilots and 370 pricing treatments, residential customers reduce their on-peak usage by 6.5 per cent for every 10 per cent increase in the peak-to-off-peak price ratio. In the presence of enabling technology such as smart thermostats, the effect is stronger. On average, customers enrolled on TVRs that offer enabling technologies reduce peak usage by 11 per cent for every 10 per cent increase in the price ratio.

I. GLOBAL DEPLOYMENTS

As shown in Figure 1, utilities across the globe are experimenting with multiple pricing options.

For example, since 2014, Spain has offered real-time pricing as the regulated default rate for residential customers, with approximately 40 per cent of customers currently enrolled.[4]

In Italy, TOU rates have been mandatory since 2010 for all low-voltage residential customers.[5] A 1.5 year transitional phase included limited variation between the peak and off-peak prices, before expanding to a larger price difference for the final tariff.

In the United Kingdom, Green Energy UK offers a time-varying TIDE tariff, while in 2018 Octopus Energy tested the first half-hourly TOU tariff and found that customers shifted usage out of peak periods by 28 per cent.[6]

The following sections provide case studies of other time-varying deployments.

A) AUSTRALIA

SA Power Networks (SAPN), which serves around 1.7 million customers in South Australia, has recently proposed offering default TOU rates for residential customers with interval meters starting in July 2020.[7] Around 20 per cent of residential and small business customers currently have interval meters, with that number expected to grow to 50 per cent by 2025.

The proposed rate offerings will include a “solar sponge” component with a super off-peak period of 10 am–3 pm when solar exports are high, an off-peak period of 1–6 am, and a peak period consisting of all other hours. In the super off-peak period of 10 am–3 pm, the “solar sponge” rate is 25 per cent of the standard rate offered to customers without interval meters, versus prices that are 50 per cent of the standard rate in the off-peak period and 125 per cent in all other hours. This is designed to respond to a change in the residential daily profile caused by an increase in solar photovoltaic adoption, which has caused a pattern of load peaks and troughs and shifted peak demand as over 30 per cent of customers have now installed solar on their rooftops.

The Australian Energy Regulatory approved these proposed rate structures in a draft decision to be effective in July 2020, though the final decision is expected in April 2020.

Separately, SAPN is also proposing to offer an optional, three-part “Prosumer” tariff for customers with interval meters.[8] The monthly demand charge is estimated using average demand over a four-hour period from 5–9 pm for November through March, while the TOU usage rates under the Prosumer tariff will be halved relative to those under the default time-varying rate. This rate structure accommodates customers who want to discharge energy storage systems during peak periods. SAPN analysis finds that the standard deviation in customer outcomes (i.e., bill impact) is significantly larger under the Prosumer tariff than with TOU.

B) CANADA

1. British Columbia

BC Hydro, which serves approximately 95 per cent of British Columbia’s 4.63 million residents, conducted a pilot from 2006–2008 testing TOU and TOU/CPP rates for approximately 2,000 opt-in customer.[9] Currently, BC Hydro’s residential energy charge includes an inclining block structure, but at the time was simply a flat rate.

To avoid adverse selection, BC Hydro randomly assigned participants into either a control group, or a treatment group facing five different TOU rate schedules. The control group were billed on the regular residential rate, as was the treatment group during summer months. In winter, the TOU rates had peak/off-peak price ratios of 3–6, while the CPP/TOU rate had a peak/off-peak ratio of 7.9 for CPP and 3 for TOU. At the time, BC Hydro staff found that over the pilot’s first winter, the treatment group’s peak kWh was 9.6 per cent less than the control group’s peak kWh, and that the availability of an in-home display (IHD) did not have a discernible effect.

However, a more recent regression analysis based on the pilot’s second winter of operation estimated that IHD would approximately double TOU reductions of 2.2 per cent–4.4 per cent without IHD, and critical peak reductions of 4.8-5.3 per cent without IHD.

2. Ontario

The Ontario Energy Board mandated the installation of smart meters for all customers to promote a culture of conservation. The C$2 billion rollout of 4.7 million smart meters was complete by 2014.[10]

Alongside smart meters, Ontario introduced default TOU rates in 2011–12 for residential and small commercial customers. Some 90 per cent of Ontario’s 4 million residential customers have been buying their energy through a regulated supply option, which features a three-period TOU rate. The TOU rates only apply to the energy portion of the customer’s bill, and off-peak, mid-peak, and on-peak prices are defined by season.

A small number of customers without smart meters are on Tiered Pricing rates with seasonally differentiated tiers and prices, while large commercial and industrial customers pay wholesale prices.

A Brattle analysis of the TOU rates from their inception in 2009 through 2014 found that for the province as a whole, TOU reduced usage during the summer peak by 3.3 per cent in the pre-2012 period, 2.3 per cent in 2012, 2.0 per cent in 2013 and 1.2 per cent in 2014.[11] Load shifting impacts were lower in winter, which similar to the summer impacts decreased over successive years of the study. No evidence of electricity conservation was observed.

With the arrival of the pandemic, the Premier decided to suspend the TOU pricing plan for 45 days. This measure was taken to lessen the burden on customers who were faced with unprecedented hardships.

The pandemic forced people to stay at home, creating an economic hardship for many families. Many wage earners lost their jobs or began to think they were on the verge of losing theirs.

The Premier issued an Emergency Order under which residential and small business customers on time-of-use (TOU) pricing will pay 10.1 cents/kWh no matter what time of day the electricity is consumed. This meant that TOU customers will be paying the off-peak price, which is currently levied from 7 pm to 7 am, throughout the day as long as the Emergency Order remains in place.

Although their intention is admirable, suspending the TOU pricing plan is a huge step back in time and in the long-run will only serve to raise customer bills. Better options exist for assisting customers facing economic hardship. Rebates will assist customers to pay for essential electricity services while still giving customers a price signal to defer discretionary electricity usage to the cheaper off-peak period. Moreover, rebates can potentially be targeted to those customers with the greatest need, whereas the change in the TOU rate will disproportionately benefit large energy users, irrespective of the income or need.

For those customers who do feel that TOU is an unwelcome hardship, the Government can remind them that it is not mandatory. They can opt-out of it and chose another plan.

It’s worth recalling that TOU pricing was deployed in Ontario in 2009 to reduce customer electricity bills by encouraging customers to curtail electricity usage during the peak period when it is more expensive to generate the power. While customers in Ontario were defaulted onto the TOU pricing plan, this rate was not mandatory since customers had the option to opt-out and choose a flat rate offered by a competitive retail supplier.

In Ontario, some 90 per cent of all residential and small business customers still take their electric service on the TOU pricing plan. A team of consultants from The Brattle Group analyzed three years of data from a representative sample of customers in Ontario for the Ontario Power Authority (now part of the IESO). Our analysis showed conclusively that the TOU pricing plan reduced consumption during peak periods and moved it to off-peak periods. By so doing, it reduces the cost of electricity to all Ontarians and also minimizes unintended subsidies between customers. Those who consume more power when it is more expensive to generate pay their fair share of electricity costs. They are not subsidized by those who consume less power during the expensive period.

While Premier Ford desires to address the economic hardship of Ontarians, changing the price of electricity is not the best way of doing it. Ontario’s TOU pricing plan has been admired throughout the globe. It has made Ontario stand out as a leader in the pricing of electricity. In the US, California, Colorado, Michigan and Missouri are giving serious consideration to deploying TOU pricing as the default option to manager energy costs and to pave the way for a clean energy future. Other states are likely to follow suit.

Scrapping the TOU pricing plan means annulling the transmission of efficient and equitable electricity price signals. It would be a huge step back in time and would ultimately hurt customers by driving up their electricity bills. To address the issue of affordability during the pandemic, the Government of Ontario should instead offer direct subsidies to those who can least afford electricity costs. This could be done by given them a rebate against their monthly bills and leaving the pricing plan intact.

3. Québec

From December 2008 to March 2010, Hydro-Québec (HQ) conducted a “Time it Right” pilot with 2,200 households in four cities.[12] Approximately 88 per cent of participants stayed on the experimental rates through the end of the pilot, which tested two rate designs, Réso (TOU) and Réso+ (TOU/CPP), summarized below.

Figure 3: HQT “Time it Right” Pilot Rates[13]

Réso Réso+
Winter Summer Winter Summer
(CAD cents/kWh) Peak Off-Peak Peak Off-Peak Peak Off-Peak Peak Off-Peak
First 15 kWh per day 6.57 4.34 6.15 4.65 6.15 3.60 6.15 4.65
Additional kWh 8.63 6.40 8.19 6.69 8.19 5.63 8.19 6.69
Critical peak usage 18.19

 

Under Réso, usage reductions in the peak period were not statistically significant. Under Réso+, 28 critical days were called, with a statistically significant average reduction of approximately 6 per cent (0.27 kW) in critical peak events over the two winters.

In April 2019, Hydro-Québec began gradually rolling out opt-in residential PTR and CPP rate offerings for a limited number of customers.[14] Randomly selected customers were invited to sign up for one of the two dynamic pricing rates, with sign-ups reaching the maximum limit for winter 2019–2020.

The first rate, the Winter Credit Option, offers a 50 cents/kWh peak time rebate for reducing electricity during winter peak demand events. The fixed charge and two-tiered variable charge for all other hours are the same as under the default residential rate, which charges 4.28 cents/kWh for energy consumed up to 40 kWh a day, and 7.36 cents/kWh for all other usage.[15]

The second option, Rate Flex D, charges a higher rate of 50 cents/kWh for energy consumed during winter peak demand events. In summer, the fixed charge and two-tiered variable charge for all other hours are the same as under the default residential rate, while in winter, the variable charge includes savings of 22–30 per cent depending on the tier. There may be 25–33 events per winter, at most, for a maximum of 100 hours in all.

C) NEW ZEALAND

1. Vector Limited

Vector Limited, the distribution utility that serves Auckland, the most populous city in New Zealand, conducted a PTR pilot program jointly with a retail, Mercury, from June–August 2019 with 630 customers.

At the time, Vector served most residential customers on a two-part rate with a flat volumetric charge. The peak time rebate was applied only to the distribution rate, with a peak to off-peak ratio of 5.4:1. There were 7 event days with both a morning peak period (7–11 am) and evening peak period (5–9 pm). Event days were triggered by Vector staff when minimum peak temperature was expected to drop below 9 degrees.

In April 2020, Vector expects to restructure its flat distribution charge as a TOU charge for Residential and General Consumer customers.[16] The TOU rates have a peak period of 7–11 am and 5–9 pm weekdays, and a peak/off-peak ratio of approximately 2.5:1 for Low User customers and 5:1 for Standard customers.[17] It will be up to the retailers whether to pass through these time-of-use delivery charges to retail customers or to bundle them into some other types of charges.

D) US BENCHMARK

According to 2018 EIA Form-861, 322 U.S. utilities offer at least one form of time-varying rate to residential customers.[18] Altogether, 5.5 million customers (or 4 per cent of all residential customers) are enrolled on one of these time-varying rates, with the following 15 utilities accounting for 86 per cent of all customers enrolled on a time-varying rate.

Figure 4: Largest U.S. Time-Varying Deployments

Highlights of several of the leading utilities follow.

1. Arizona

Arizona Public Service (APS) leads all U.S. utilities with the largest number of customers enrolled on an opt-in time-of-use rate — over 600,000 customers, or approximately 56 per cent of its 1.1 million residential customers, are on a time-of-use rate. APS offers five residential rate schedules, of which three are TOU rates and two are non-TOU rates restricted to customers with an average usage of less than 1,000 kWh.[19]

Among the TOU rates, Saver Choice (“R-TOU-E”) includes seasonal on-peak and off-peak energy charges, with a ratio of slightly over 2:1 and an on-peak period of 3–8 pm Monday–Friday. There is also a winter-only super off-peak energy charge. The other two rates, Saver Choice Plus (“R-2”) and Saver Choice Max (“R-3”), have a smaller peak/off-peak ratio and no super off-peak period, but include a demand charge.

Salt River Project, Arizona’s second largest utility, also offers three TOU options, with roughly 315,000 customers, or 33 per cent of its nearly 1 million residential customers, are enrolled on a TOU rate.[20]

One option, the SRP Time-of-Use Price Plan (“E-26”), defines on-peak hours of weekdays 2–8 pm in summer and 5–9 am and 5–9 pm in winter, with a peak/off-peak ratio of 1.4:1 in winter and 2.9:1 in summer. SRP’s Price Plan for Residential Super Peak Time-of-Use service offers two other options, E-21 and E-22, both of which charge higher costs in a three hour weekday time frame. The E-21 plan defines an on-peak period of weekdays 3–6 pm, while the E-22 plan’s peak period covers weekdays 4-6 PM. Both options have a peak/off-peak ratio of 3.5:1 in the summer, 4:1 in the summer peak, and 1.4:1 in the winter. Under the EZ-3 Price Plan, customers receive a 90-day bill protection. If their first three bills are higher than they would have been on the default Basic price plan, they are credited the difference and switched back to the Basic plan.

2. California

Pacific Gas & Electric (PG&E) currently has around 400,000 customers on an opt-in time-varying rate[21]. Currently, residential customers can opt into an E-TOU-B option with peak hours from weekdays 4–9 pm, capped at 225,000 customers, while electric vehicle owners can sign up for rate schedule EV-B, a residential time-of-use service that requires the installation of a separate meter. EV-B charges lowest costs in the 11 pm–7 am off-peak period, and higher costs in the peak (2–9 pm) and partial-peak (7 am–2 pm and 9–11 pm) periods.[22]

The other two California investor-owned utilities, Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E), have approximately 370,000 and 155,000 customers on opt-in TOU rates respectively. Almost 99 per cent of customers that were moved to either SCE or SDG&E’s TOU pilots chose to stay on a TOU plan.

All three of California’s investor-owned-utilities are planning the deployment of default time-of-use rates. SDG&E is beginning its rollout in March 2020, offering two TOU plans with a 4–9 pm peak period and a 2.1:1 peak/off-peak period, as well as an additional super off-peak period from 12–6 am. PG&E and SCE will begin transitioning customers in October 2020.

The California Public Utilities Commission has ordered two customer guarantees as part of the rollout. Customers will be provide an estimate of how their TOU bill compares with what their bill would have been on their old rate so they can see if they saved money or not. A 12-month bill guarantee, such that customers whose first-year bill under the new TOU rate is higher than it would have been under their old rate will be credited the difference.[23]

Sacramento Municipal Utility District (SMUD), one of the largest U.S. municipalities, has already transitioned its 600,000 customers to default TOU rates. The TOU rate has a peak period of 5–8 pm year-round.[24] Rates are highest in the summer months. They feature a peak rate of $0.2941/kWh, an off-peak rate of $0.1209, and an additional mid-peak rate (for noon to 5 pm and 8 pm to midnight) of $0.1671/kWh. Customers without rooftop solar can opt out and elect the Fixed Rate, which charges three different flat volumetric prices based on three different periods of the year. SMUD estimates the Fixed Rate is approximately 4 per cent higher than the TOU rate.

Before filing for its TOU rates, SMUD conducted a successful pilot program in 2012 and 2013 testing TOU, CPP, and TOU/CPP rates. The pilot found significant load shifting, customer preference for TOU over CPP, and about 50 per cent higher average reductions with opt-in versus opt-out (which had 90 per cent retention).[25]

3. Michigan

In the summer of 2019, Consumers Energy rolled out a TOU “Summer Peak Rate” to approximately 3 per cent of its 1.6 million customers, selecting communities that were representative of its service territory. During the months of June–September, the Summer Peak Rates charges an on-peak rate from weekdays during the 2–7 pm window a price that is about 1.5 times higher than the off-peak rate. The off-peak rate is the regular rate from October–May. On June 1, 2020, all residential customers will be defaulted to the TOU plan.

The rollout is part of Consumers’ “Clean Energy Plan”, which commits to 90 per cent clean energy by 2040. As part of the default TOU rollout, Consumers will deploy a bill impact tool in March 2020 so customers can see how their bill would differ under the new rate.[26]

4. Maryland

Baltimore Gas & Electric (BGE), Potomac Electric Power Co (Pepco), and Delmarva Power offer opt-out peak-time rebate programs that reward customers with $1.25/kWh bill credits for reducing energy usage during a handful of summer peak demand events.[27]

Customers receive an alert, usually the day before the savings event, and can choose whether or not to participate in a particular event by reducing their use. Energy and peak demand reductions are bid directly into the PJM wholesale market.

All three utilities offer the program on an opt-out basis, resulting in the enrollment of nearly all customers with smart meters.

According to EIA Form-861, 1.1 million (96 per cent) of BGE customers, 516,000 (98 per cent) of Pepco customers, and 175,000 (98 per cent) of Delmarva customers are enrolled. In 2018, BGE reported a 76 per cent participation rate among its 1.1 million eligible customers, with an average bill credit of $6.30. BGE’s Energy Savings Days program is currently largest-scale deployment of dynamic pricing by any US utility.

5. Illinois

Commonwealth Edison (ComEd) fully deployed smart meters to its 4 million customers between 2013 and 2019. All customers with smart meters are eligible for the Peak Time Savings Program, which is offered on an opt-in basis.[28] In the summer of 2018, approximately 275,000 customers were enrolled in it, representing just under 7 per cent of the total. Customers earn a credit of $1 for every kWh saved relative to their expected usage, where a weather-normalized expected usage is calculated based on usage history. ComEd estimates that most customers will receive a $1–$12 bill credit for each event. Customers are notified on the day of the event, as early as 9 am up to 30 minutes before the event. Historically, ComEd has announced between 3 and 5 events during each summer season, with each event lasting a few hours between 11 am–7 pm. Customers may not participate simultaneously in ComEd’s Central AC Cycling program.[29]

ComEd also offers its residential customers an Hourly Pricing Program. Under ComEd’s Hourly Pricing program, prices vary hourly according to wholesale market prices. Customers can access online energy-management tools and view their hourly usage from the prior day. In 2018, the 30,251 Hourly Pricing participants saved an average of 10 per cent (~$75) compared to ComEd’s standard fixed-price rate.[30] An analysis by Citizens Utility Board and EDF found 97 per cent of ComEd customers would have seen lower bills on RTP without changing behavior. The average customer would have saved $86.63 (13.2 per cent) per year.[31]

Ameren Illinois, which serves the southern portion of the state, offers an equivalent Power Smart Pricing Program. In 2018, 79 per cent of the Power Smart Pricing’s 13,339 active participants saw savings compared to what they would have paid under Ameren Illinois’ standard fixed-price rate. Customers saved an average of 8 per cent ($58). Both programs are mandated by Illinois’ Public Utilities Act, and overseen by the Illinois Commerce Commission.[32]

6. Oklahoma

Oklahoma Gas & Electric (OG&E) rolled out a dynamic pricing rate coupled with a smart thermostat to its residential customers a few years ago. The program, called “Smart Hours,” features variable peak pricing, or four levels of peak pricing depending on what day type it happens to be (Low, Standard, High, Critical). There are fixed summer and winter peak hours.[33] Prices during peak hours vary depending on system conditions, and are communicated to the customer by 5 pm the previous day. Critical periods can be communicated with as little as two hours’ notice. The expectation is that there would be 10 Low price days, 30 Standard price days, 36 High price days, and 10 Critical price days in a typical year.

The program is also offered to Small GS customers whose annual demand is less than 10 kW or less than 400 kW with a load factor of less than 25 per cent. Some 130,000 customers out of 650,000 (20 per cent) are on that rate today; they control their thermostat setting, not OG&E. Impact evaluations carried out by OG&E show that customers on Smart Hours drop their average peak load by around 40 per cent. Average bill savings amount to around 20 per cent of the customer’s bill.

7. New York

Consolidated Edison (Con Edison), which serves 3.4 million customers in New York City’s five boroughs and Westchester County, employs a standard Residential delivery rate consisting of a fixed charge and a variable charge. For June through September, the variable charge is a two-tiered inclining block rate, while it is a flat volumetric charge in all other months.[34]

Con Edison also offers a voluntary TOU rate with a peak period of 8 am to midnight. The TOU rate’s delivery rates reflect a 14.2:1 peak/off-peak ratio from June through September and a 5.2:1 ratio in all other months.[35] The rate also has a year-round monthly customer charge of $20.46. Summer super-peak pricing is in effect 2–6 pm on weekdays, but does not apply to customers who purchase their electricity from energy service companies.

Con Edison is also conducting a three-year Smart Energy Plan pilot program with time-varying demand charges for distribution service. During the peak period (noon to 8 pm weekdays), the demand charge is $19.66/kW in the summer and $15.13/kW in the winter, compared to $7.64/kW in the year-round off-peak period.[36] Around 15,000 customers were initially recruited into the program, using both opt-in and opt-out enrollment, with the option to opt out of the program at any time.

Con Edison’s AMI rollout is ongoing and expected to be completed by the end of 2022. Pilot participants were selected from regions with high AMI penetration. Customers that have smart meters but were not recruited for the pilot can currently still enroll on a “walk-in” basis. Con Edison is also testing another demand rate with a peak period of 2–10 pm weekdays and a slight difference in prices.[37]

II. LESSONS LEARNED FROM TVR DEPLOYMENTS

Utilities have long deployed TVR, some more successfully than others. Following are key lessons learned during the past two decades of deployment.

A) DESIGNING THE RATES

Rates should be cost-reflective to promote economic efficiency and equity. However, they should also be customer focused. Unless new rates have savings opportunities, customers will either not join or not alter their usage habits to respond. Savings opportunities can be maximized by discounting off-peak prices substantially compared to the existing rate.

B) MARKETING THE RATES

Most utilities offer time-varying rates but only a handful of customers are on them. Often, customers don’t even know the rates exist due to limited customer outreach and advertising on traditional and social media. Customers who know the rates exist have questions, but customer service staff are untrained to answer them while information on websites is poorly presented and couched in utility-speak that eludes customers. This can be remedied by studying customer service practices of utilities like APS and OG&E, which have large numbers of customers on time-varying rates.

Utilities can also conduct focus groups with customers to get insights on which design features appeal to customers and which ones turn them off. For further insights, conjoint analysis can be carried out with data gathered via online customer surveys.

C) INCLUSION OF ENABLING TECHNOLOGIES

Customer responses to time-varying rates can be facilitated and often magnified by including new digital thermostats rapidly being acquired by customers. For example, OG&E has successfully used smart thermostats to boost response and take the pain out of demand management. Other enabling technologies include digitally-enabled appliances and home-energy controllers.

D) INCLUSION OF BEHAVIOURAL MESSAGING

Research has shown that behavioural messaging or social norming can boost response. This can be done through mailers, emails and text messages, which inform customers of how their change in usage compares with the response of peers on the same rate.

E) TRANSITIONING TO NEW RATES

Many rollouts are abruptly handled, such that customers are not prepared for the arrival of the new rates, and customer service staff are not trained to answer customer questions. This can be avoided through proper planning.[38]

* Dr. Ahmad Faruqui is a Principal with The Brattle Group in San Francisco.

Cecile Bourbonnais is a Senior Research Analyst with The Brattle Group in San Francisco.

** Estimated participation is based on historical trends.

  1. There is compelling evidence from 370 deployments of TVRs throughout the globe that customers respond to TVRs by lowering usage and shifting some or all of the peak period usage to the mid-peak or off-peak periods. See Figure 1.
  2. Adam Cooper & Mike Shuster, “Electric Company Smart Meter Deployments: Foundation for a Smart Grid (2019 Update)” (December 2019), online (pdf): The Edison Foundation Institute for Electrical Innovation <http://www.edisonfoundation.net/iei/publications/Documents/IEI_Smart%20Meter%20Report_2019_FINAL.pdf>.
  3. See Ahmad Faruqui, Sanem Sergici & Cody Warner, “Arcturus 2.0: A meta-analysis of time-varying rates for electricity” (2017) 30:10 The Electricity J 64.
  4. “Voluntary price for the smaller consumer (PVPC)” (2014), online: RED Eléctrica De España <https://www.ree.es/en/activities/operation-of-the-electricity-systemvoluntary-price-small-consumer-pvpc>.
  5. Maggiore et al, “Evaluation of the effects of a tariff change on the Italian residential customers subject to a mandatory time-of-use tariff” (2013), online (pdf): European council for an energy efficient economy <http://www.eceee.org/library/conference_proceedings/eceee_Summer_Studies/2013/7-monitoring-and-evaluation/evaluation-of-the-effects-of-a-tariff-change-on-the-italian-residential-customers-subject-to-a-mandatory-time-of-use-tariff/2013/7-014-13_Maggiore.pdf>.
  6. “Agile Octopus A consumer-led shift to a law carbon future” (2018), online (pdf): Octopus Energy <octopus.energy/static/consumer/documents/agile-report.pdf>; Green Energy UK, Press Release, “A new and better way to control home energy bills” (5 January 2017), online: <www.greenenergyuk.com/PressRelease.aspx?PRESS_RELEASE_ID=76>.
  7. SAPN, “Attachment 17 Tariff Structure Statement Part B – Explanatory Statement” (10 December 2019) online (pdf): Australia Energy Regulator <www.aer.gov.au/system/files/SAPN%20-%20Revised%20Proposal%20-%20Attachment%2017%20-%20Tariff%20Structure%20Statement%20Part%20B%20-%20Explanatory%20Statement%20-%20December%202019_0.pdf>.
  8. Ibid; Note that the Australian Energy Regulatory approved these proposed rate structures in a draft decision to be effective in July 2020, but the final decision is still pending.
  9. Chi-Keung Woo et al, “Winter Residential Optional Dynamic Pricing: British Columbia, Canada” (2017) 38:5 The Energy J 115.
  10. “Electricity Rates”, online: OEB <www.oeb.ca/rates-and-your-bill/electricity-rates>.
  11. Neil Lessem et al, “The Impact of Time-of-Use Rates in Ontario” Public Utilities Fortnightly (February 2017), online: <www.fortnightly.com/fortnightly/2017/02/impact-time-use-rates-ontario> (local distribution companies (LDCs) gradually adopted TOU rates beginning in 2009, and were all on TOU by 2017. The peak/off-peak price ratio for all of LDCs throughout the analysis period was approximately 1.5).
  12. Hydro-Quebec, “Rapport final du Project Tarifaire Heure Juste” (2 September 2010), online (pdf): Régie de l’énergie Québec <www.regie-energie.qc.ca/audiences/3740-10/Demande3740-10/B-1_HQD-12Doc6_3740_02aout10.pdf>.
  13. Note winter is defined as December through March, and summer as April through November. Peak hours are from 6 am–10 pm under Réso, and 7–11 am and 5–9 pm under Réso+. The default fixed charge of 40.46 cents/day applied under both experimental rates.
  14. “Dynamic pricing”, online: Hydro Québec <www.hydroquebec.com/residential/customer-space/rates/dynamic-pricing.html>.
  15. “Electricity Rates effective April 1, 2019” (2019), online (pdf): Hydro Québec <www.hydroquebec.com/data/documents-donnees/pdf/electricity-rates.pdf>.
  16. “Electricity prices effective from 1 April 2020”, online: Vector <www.vector.co.nz/personal/electricity/pricing/electricity-prices-2020>.
  17. The Low User tariff represents a low fixed-charge option to assist low-use customers.
  18. Among these, 303 offer Time-of-Use (TOU), 29 offer Critical Peak Pricing (CPP), 14 offer Peak Time Rebate (PTR), 9 offer Variable Peak Pricing (VPP), and 6 offer Real-Time Pricing (RTP).
  19. “Rates, Schedules and Adjustors”, online: aps <www.aps.com/en/Utility/Regulatory-and-Legal/Rates-Schedules-and-Adjustors>.
  20. “SRP Time-of-Use Price Plan”, online: SRP <www.srpnet.com/prices/home/tou.aspx>; “SRP EZ-3 Price Plan”, online: SRP <www.srpnet.com/prices/home/ez3.aspx>.
  21. “Tariffs”, online: PG&E <www.pge.com/tariffs/index.page>.
  22. Some customers are on an EV-A option that combines the vehicle’s electricity costs with those of the customer’s residence, but this rate is now closed to new enrollments.
  23. Herman K Trabish, “California utilities prep nation’s biggest time-of-use rate rollout”, Utility Dive (6 December 2018), online: <www.utilitydive.com/news/california-utilities-prep-nations-biggest-time-of-use-rate-roll-out/543402>.
  24. “Time-of-Day (5-8 p.m.) Rate”, online: SMUD <www.smud.org/en/Rate-Information/Time-of-Day-rates/Time-of-Day-5-8pm-Rate>.
  25. Jennifer M. Potter, Stephen S. George & Lupe R. Jimenez, “Smart Pricing Options Final Evaluation” (5 September 2014), online (pdf ): SMUD <www.smud.org/-/media/Documents/Corporate/About-Us/Energy-Research-and-Development/research-SmartPricing-options-final-evaluation.ashx>.
  26. “Summer Peak Rate”, online: Consumers Energy <www.consumersenergy.com/residential/rates/electric-rates-and-programs/summer-time-of-use-rate>.
  27. “Energy Savings Days”, online: BGE <www.bge.com/WaysToSave/ForYourHome/Pages/EnergySavingsDays.aspx>; “Peak Energy Savings Credit”, online: Delmarva <www.delmarva.com/WaysToSave/ForYourHome/Pages/DE/PeakEnergySavingsCredit.aspx>; “Peak Energy Savings Credit”, online: pepco <www.pepco.com/WaysToSave/ForYourHome/Pages/MD/AboutPeakEnergySavingsCredit.aspx>.
  28. “Peak Time Savings”, online: ComEd <www.comed.com/WaysToSave/ForYourHome/Pages/PeakTimeSavings.aspx>.
  29. Eric Bell, Shannon Hees & Chris Ramee, “Commonwealth Edison Company’s Peak Savings Program Annual Report” (August 2019), online (pdf ): ICC <www.icc.illinois.gov/docket/P2012-0484/documents/290476/files/506639.pdf>.
  30. Elevate Energy, “ComEd’s Hourly Pricing Program 2018 Annual Report”, online: ICC <www.icc.illinois.gov/docket/P2015-0602/documents/293022>.
  31. Jeff Zethmayr & David Kolata, “The Costs and Benefits of Real-Time Pricing” (14 November 2017), online (pdf ): The Citizens Utility Board <citizensutilityboard.org/wp-content/uploads/2017/11/20171114_FinalRealTimePricingWhitepaper.pdf>.
  32. Elevate Energy, “Ameren Illinois Power Smart Pricing 2018 Annual Report” (24 April 2019), online (pdf): ICC <www.icc.illinois.gov/docket/P2011-0547/documents/285537/files/497943.pdf>.
  33. “SmartHours FAQs”, online: OGE <www.oge.com/wps/portal/oge/save-energy/smarthours/faq>.
  34. Consolidated Edison Company of New York, Inc., “Schedule For Electricity Service” (29 March 2012), online (pdf): conEdison <www.coned.com/_external/cerates/documents/elecPSC10/electric-tariff.pdf>.
  35. “Time-of-Use Rates”, online: conEdison <www.coned.com/en/save-money/energy-saving-programs/time-of-use>.
  36. “Introducing the Smart Energy Plan”, online: conEdison <www.coned.com/en/accounts-billing/smart-energy-plan>.
  37. “RE: Innovative Pricing Pilot Filing”, online (pdf): conEdison <www.coned.com/_external/cerates/documents/elec/pending/innovative-pricing-pilot-filing.pdf>.
  38. See Ahmad Faruqui & Stephen S. George, “Demise of PSE’s TOU program imparts lessons” (2003) 81:1 Electric Light & Power 14, online: Powergrid International <www.power-grid.com/2003/01/01/demise-of-pses-tou-program-imparts-lessons>.

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