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2008 Regulators Forum: Putting Efficiency First

New rate structures prioritize conservation, but will customers buy it?

Fortnightly Magazine - November 2008

wherever we can find them, because this is going to be very important.

General public awareness now of the issues regarding climate change and energy costs will help this education program succeed.

Smitherman (Texas): We need to engage in customer education for smart meters, but do it in a really smart way.

For example you can give a customer an inexpensive device they can put by the kitchen sink that will tell them how much they are consuming at that moment, what the price is, and at the present rate of consumption what their bill will be at the end of the month. That kind of instant feedback is probably more effective than taking out ads in the newspaper or having a television commercial, because you’ve gotten right into the home, instantaneously giving feedback to the customer.

Butler (N.J.): We have a huge challenge in how we deal with ratepayers. This is a new world where ratepayers will be able to take more control of what they do and what they pay for it, but that applies to perhaps a minority subset of ratepayers. It’s incredibly disruptive for the average ratepayer to go to a new system where they have a brand new meter [which they’ve had to partially pay for] that’s got all this great stuff, and now they’ve got to figure out how they need to change their behavior to avoid a larger bill and maybe even produce a smaller bill. That’s quite a change in behavior, and that’s the difficult part. That’s why we have to be very clever about how we go about this, so we don’t get a knee-jerk reaction.

Pfannenstiel (Calif.): One of the most difficult transition issues is going to be that frankly there will be winners and losers, and some people are going to have usage on peak that is just too difficult for them to move off peak, or not worth it. From an economist’s standpoint one can say rather blithely, ‘Well, they are imposing these costs on the system, and everybody else shouldn’t be subsidizing their use on peak. So therefore they should pay the higher prices.’ But in a real public-policy sense, if you have too many losers it’s just not going to work.

[Conversely,] I don’t think we want to be giving customers signals that say, ‘It doesn’t matter what you do on peak, we’ll hold you harmless.’ That might work on transition but ultimately it’s defeating the purpose.

We need to find a way to help people understand and adapt to these rates. I think we’ve underestimated the difficulty of doing that. We’ll have to move in wisely. We have to recognize it will take some time, and that transition time will vary for each state—and perhaps each utility service territory—to find the right balance of how quickly to move this in.

 

Fortnightly: Isn’t it really necessary to close the technology loop with home networking, or at least some degree of intelligence with the thermostat, which is the low hanging fruit?

Butler (N.J.): You’re right, it is the

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