Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
2008 Regulators Forum: Putting Efficiency First
New rate structures prioritize conservation, but will customers buy it?
technology, but then it becomes a chicken-and-egg issue. I think the technology is somewhat there now. We’ve got thermostats that can do some pretty major things, and we have appliances that are ready to take advantage of TOU differential rate structures. The question is what part do you press on first? We’ve got to be careful about how we do this, so we don’t have people saying, ‘Hey I’ve got these appliances now, how do I use them? My meter isn’t smart enough.’ Or the converse, ‘Now I’ve got these smart meters, but I can’t afford the new refrigerator-freezer that can respond to these price signals.’
Pfannenstiel (Calif.): The first thing that needs to happen is some kind of in-home display. That information has to be inside the house, whether it’s on a computer or a refrigerator magnet or something. That should motivate the customer to seek out these enabling technologies. They are there now and the marketplace is just gearing up for this. This is an enormous new opportunity, and everybody is getting excited about it. But it’s going to be a demand pull. Customers are going to want those technologies, and they’re going to go out and seek them, once they start seeing what their usage patterns look like and what the costs are.
Knowledge and Control
Fortnightly: All the analysts I talk to agree that power costs are going up. If we go to consumers at this point saying we’re going to help you control your bill by putting in this technology, and then they see a big cost increase, could this turn into a PR nightmare? How do we avoid that possible outcome?
Pfannenstiel (Calif.): There’s always that danger. Public outcry over higher energy costs is really hard to control, because customers see higher rates and they are justifiably concerned, even if the reasons they are attributing to those higher rates are the wrong reasons. As with anything else, if the timing is off it could be brought down for reasons having nothing to do with itself.
That gets back to the utility business case. If it can be shown rather clearly that advanced meters will bring down the utility’s costs rather than drive them up, I think people will understand and will buy it, that this isn’t the cause of the problem.
Also there are other applications where people understand the concept of peak load or TOU pricing. Certainly telephone has always been that way, and there are other concepts of peak-load pricing where things are more expensive at certain times. We’ve never done that in electricity and people don’t see us that way. That’s part of the education effort. That’s got to be done massively.
I’m hoping that in California every time the utilities put in an advanced meter they target that home for some massive education effort. I don’t know they’re quite there yet, but that’s what needs to happen.
[With advanced metering and dynamic pricing], the customer has the opportunity to be better off, and in fact has more control. More knowledge and