Pilot projects are demonstrating the potential of smart metering and smart rates to make the most of supply and demand resources. But as empirical studies show, not all pricing designs are equally...
Dynamic Pricing and Low-Income Customers
Correcting misconceptions about load-management programs.
11-percent peak reduction, while the higher-income customers reduced their peak loads by 13 percent.
• PG&E SmartRate Tariff–California : PG&E deployed the first large-scale CPP program in North America directed at residential customers in the summer of 2008 for the six months May through October. The SmartRate tariff initially was offered to residential (E-1 and E-8) and non-residential (A-1) customers in the Central Valley town of Bakersfield and the greater Kern County region, which lies in the southern-most portion of its service area. The SmartRate program was offered again in 2009. By the end of summer 2009, the program had roughly 25,000 active participants. Results for both 2008 and 2009 are reported below.
The SmartRate price was layered on top of PG&E’s default tariff. For residential customers, the incremental charge of $0.60 per kWh applied during critical hours on SmartDays, and a credit of about $0.03 per kWh applied to all other hours to maintain revenue neutrality.
Up to 15 SmartDays could be called over the course of the summer; in 2008, nine SmartDays were called. The critical peak period was from 2 p.m. to 7 p.m. The incremental charge and credits were layered on top of the existing 5-Tier inclining block rate tariff.
Low-income customers are designated as those who qualify for California Alternate Rates for Energy (CARE), a program in which low-income customers receive substantially discounted rates.
In 2008, the average residential customer across the nine SmartDays reduced peak load by 16.6 percent; CARE customers reduced peak load by 11 percent; and, non-CARE by 22.6 percent on average (see Figure 5) . Hence, the response of low-income customers was lower than that of the higher income customers, but still sizable.
In 2009, the average CARE peak reduction was 7.5 percent and the average non-CARE peak reduction at 22.7 percent, with an overall average customer response of 15 percent. Thus, the CARE customers in 2008 responded half as much as non-CARE customers, while in 2009 they responded one-third as much.
• California Statewide Pricing Pilot (SPP): In 2003, California initiated its Statewide Pricing Pilot (SPP) to help quantify demand response to dynamic pricing. The SPP included approximately 2,500 residential and small commercial and industrial customers and tested several different time-varying rates during the following three years. Although this pilot now is several years old, it’s included because the results are widely cited and remain relevant.
The rates included a TOU rate, in which the peak to off-peak price ratio was roughly 2:1 and a CPP tariff, in which the critical peak to off-peak ratio was 6:1. The CPP-F rate had a fixed critical-peak period and day-ahead notification. Similar to the PG&E Smart-Rate program, the peak period was from 2 p.m. to 7 p.m.
The experiment was divided into three tracks, two of which are relevant. Track A was designed to be representative of California’s general population. And Track B was designed to be representative of the members of a low-income community in San Francisco. Track A was spread over four climate zones in California, and Track B focused on a single