It’s no secret that something needs to give when it comes to how we deliver and pay for electricity in this country. Besides improving the tragically outdated grid, there is ample discussion about moving both residential and commercial customers to time-of-use pricing schemes that, to some degree, more closely reflect the actual variable cost of the commodity.
The latter proposition, however, is fraught with peril for utilities. Besides the question of what those prices would look like, there’s an even more delicate issue of what happens if people’s bills go up. The idea is that price signals will make consumers shift when they use energy, or maybe even (gasp!) compel them to cut back on energy use altogether. It sounds good in theory, but the American Association for Retired People hates it in reality. The tone of the organization, both in writing and in interviews, questions whether savings are possible, especially for retired people who are at home all day (what happened to the active baby-boom generation redefining retirement?).
The powerful lobby has already fought against Baltimore Gas & Electric when it proposed mandatory time-of-use pricing, and in a 2010 white paper, the organization is skeptical of the advantages of smart meters overall, despite repeated studies that have found them to be accurate. Many of their arguments, from utilities needing to shoulder some of the cost to not preying on the poor and infirm, are completely valid. However, the overall opposition does not come with any constructive criticism that the market is not already addressing, nor does it look at best practices when it comes to changes in pricing.
The group does not investigate the type of plans that could be beneficial to its constituents or identify the education components it would like to see in place so customers understand their usage more clearly. Most importantly, AARP does not stand alone and has the ability to make a lot of noise, and so its concerns, whether justified by the facts or not, are worth careful consideration by utilities looking to forge ahead to build new and more meaningful relationships with their customers.
After the fiasco BG&E faced in getting its smart meter proposal approved by the Maryland PSC, it’s pretty well assured that there will not be a mandatory plan proposed by any other larger utility area anytime soon.
So what about the current reality of voluntary programs? “Our primary concern is consumer education,” said Marti Doneghy, Senior Legislative Representative for AARP’s government relations department on federal utilities issues. “Making sure the customers understand the impact and how it’s going to affect their life, health and safety.”
Life, health and safety? No organization takes its mission more seriously than utilities when it comes to the need to provide an essential service, something that AARP seems to doubt. It was implied that those who sign up for any plan that isn’t a flat fee would risk their health and safety rather than benefit. When pressed about what that education campaign might look like to properly promote a variable pricing plan, Doneghy couldn’t produce any details. “I really hadn’t given that any thought,” she said.
A utility that does have mandatory TOU, Toronto Hydro, has given it a lot of thought. It has used everything from stickers to websites to mailings to inform their customers about the impending changes. Some bills did go up for users, mostly because the difference between peak and off-peak isn’t big enough to inspire load shifting, but the average increase was about $1.50 per month.
AARP is worried about seniors who already make choices between food and medicine and energy. “Their quality of life would be affected with mandatory time-of-use programs,” said Doneghy. But that statement is made on the assumption that seniors would undoubtedly see a price increase. It also ignores the more pressing reality of how to help seniors maximize benefits of voluntary programs that are coming to the market.
Many pilots, including PowerCents DC, found that homeowners, including low-income customers, saved money on variable pricing plans. There is no doubt that TOU pricing has to be carefully designed, and should be voluntary until there is a richer set of data on how people will be affected.
At Salt River Project in Phoenix, the TOU rates have had steady interest over the years, with nearly a quarter of their customers enrolled in one of two programs. The utility, which earns high marks year after year for customer service, urged skeptics to take a look at the wide swath of consumers, including seniors, who are happier on variable rates. “There are preconceived notions,” said Mike Lowe, SRP’s manager of Customer Services. “I would say ask customers who are participating.” He said that the rates are designed such that, even for the average consumer, switching to these plans without changing usage will result in a similar bill as a flat rate and that from there, “the savings can be substantial.” He’s been on a TOU rate for many years and his wife and children were often at home during those peak hours.
Instead of looking at the different options for TOU rates that could benefit its supporters, the AARP vaguely calls for energy efficiency programs in its white paper, something that many utilities have done in conjunction with looking at different pricing schemes and other smart grid investments. Ironically, it also suggests smart thermostats and in-home displays as potential energy savers, although at the cost of a few hundred dollars a household, these devices would likely increase rates, and without an offset like TOU pricing to achieve load shifting, customers could still bear higher prices.
Changes to billing are coming in the utility space, and it can happen with smiles and savings, as it is in the Phoenix area, or with opposing lobbyists and political turmoil. For utilities looking to make the shift, seeking to truly understand the calls for consumer protections and then offering a product that not only exceeds those calls but also offers a simple, clear benefit to range of customers, will be imperative to a smooth transition.