New technologies—and new expectations—require taking a fresh look at the institutions and practices that have provided reliable electricity for the past century. Collective action is needed to...
Biling, Blackouts, and the Obligation to Serve
Demand response-a replacement for interruptible rates-arrives none too soon. Interruptible rates are increasingly unpopular with all parties. Utilities and regulators often are unhappy about price concessions put in place years ago in return for cooperation during emergency situations that rarely or never occur. At the same time, the manufacturers and distributors that have traditionally taken advantage of interruptible rates are finding them increasingly unworkable. High-tech and food-processing facilities, for instance, frequently have processes that, if interrupted, result in the massive discarding of raw materials. Suppliers may be hit with penalties when a loss of electricity results in a failure to deliver to just-in-time customers.
Demand response solves these problems. Utilities pay incentives only when they're needed. And participants have options to determine the timing and extent of load reduction. It's a win-win approach to increasing grid efficiency and ensuring that utilities meet their obligation to serve.
Fundamental to effective demand response is integrating complex billing software into basic customer care and billing systems. Complex billing (also called "real-time," "interval," or "time-series" billing) uses special meters to measure consumption during a prescribed time interval-generally 10 to 60 minutes for electricity.
In theory, a contract between a customer and a utility could specify different prices, terms, and conditions for each interval. In practice, most customers would find this unwieldy. Measuring consumption in half-hour intervals, for instance, could result in 1,500 separate prices per month. Thus, under normal conditions, contracts group intervals into categories similar to the time-of-use categories that have long dominated industrial-customer ratemaking-peak, shoulder, and off-peak rates. However, with the more sophisticated processing possible with complex billing software, these categories are easily expanded to include, for instance, public holidays, which are traditionally slack periods in the customer's industry.
Contracts can be set up so that different prices, terms, and conditions apply to specific intervals during a crisis. And these contracts can be dynamically altered as required, given changing grid conditions. A customer that signs up for demand response might agree to halve normal demand for a maximum of 12 hours and to pay a penalty for any interval above a specified limit. Toward the end of that period, the customer may agree to an extension, but at a different demand level, and for a different length of time. Utilities can peg the reward for participation to the length and severity of the crisis.
The Addition of Net Metering
Further grid efficiencies result from the addition of net metering options into a complex billing/demand-response program.
While national grid-connection standards have been slow to develop, many utilities have standing arrangements that take advantage of customers' on-site generation during a crisis. Current arrangements, however, are frequently primitive. When, for instance, the amount of electricity injected is simply subtracted from that month's consumption, customers may inject amounts that more closely reflect their own needs, not the utility's.
Adding complex billing to net metering significantly increases its usefulness during high-demand periods. Utilities can, for instance, vary the incentive for injection with the severity of the crisis. They can raise incentives for facilities capable of injecting at