As smart meter deployments wrap up in certain areas, the time has come to leverage the new systems with novel customer plans.
In Texas, where smart meters have been installed in most of the state, TXU Energy has just launched its latest time-of-use plan, TXU Energy Free Nights.
Much like the calling plans that proliferated during telecom deregulation, utilities are playing around with different plans to incentivize customers to move electricity use away from peak hours.
Energy Free Nights (which should perhaps be rebranded as Free Energy Nights) offer just that: no charge for energy used from 10 p.m. to 6 a.m., and a rate of about 11 cents or 12 cents per kilowatt-hour the rest of the time.
The utility estimates that if customers can shift about 10 percent of electricity use from doing laundry or running the dishwasher, they can save about $200 per year.
TXU Energy is hardly the first utility to roll out differentiated pricing plans to residential customers. Toronto Hydro has mandatory time-of-use pricing, although the spread is so minimal there has been little shift in energy use during the day.
Other Texas retailers, like Reliant, are also playing around with different options. Reliant offers a “Cash-Back Nights & Weekends” which offers a one-cent per kilowatt-hour discount from 8 p.m. to 8 a.m. and all weekend long. Oklahoma Gas & Electric (OGE) is rolling out a program, SmartHours, with a more aggressive pricing structure. Hourly pricing ranges from $0.045 to $0.23, and the rate is $0.46 per kilowatt-hour for critical peak. TXU has also offered a three-tiered time-of-use rate in the past and might bring it back.
Just like in the early days of telecom deregulation, there will be a variety of plans that utilities will put out into the marketplace to see what works. In the competitive landscape of Texas, which also has smart meters going in statewide, there will likely be some of the most interesting developments.
“One of the reasons we’re really excited is that I think this hits a broader audience,” said Jennifer Pulliam, director of product innovation at TXU Energy. Instead of targeting customers to shave peak, as OGE is doing, TXU is more concerned with offering differentiated products to get and keep customers.
Whether it's peak shaving or pulling in new customers, technology will likely have to be part of the picture. OGE offers free wireless smart thermostats for SmartHours customers, and TXU offers connected smart thermostats for a monthly fee separate from its Energy Free Nights plan. TXU said that currently, tens of thousands of its customers have the iThermostat, which is $8.99 a month for the first two years and $2.99 thereafter.
Smart appliances, often touted as one of the touch points for customers and the smart grid, would actually be useful for plans like Energy Free Nights. However, most of the models of washers, dryers and refrigerators that have chips in them that can actually talk to a smart thermostat are so expensive, they would never pay for themselves just by running or defrosting at night.
Pulliam noted that the plan might appeal more to night owls, but the cost is fairly competitive with other single-rate plans, and so the perk is just that energy is free at night. “This is a rate plan that has a lot of carrot attached to it,” she said. “What we’re trying to do is create sustainable customer behavior.”
TXU will continue to develop new plans to compete in Texas, but Pulliam said it’s unlikely the company would have more than one or two plans at once, to avoid confusing customers. Because Texas is the only truly competitive state in the U.S. in this regard, plans will likely rise and fall quickly based on customer acceptance. For TXU, the retail electric provider hopes Energy Free Nights will capture the interest of the mass market -- and not only night owls.