1. Accenture 2. Advanced Energy 3. Alectra Utilities 4. Ally Energy Solutions 5. Alternative Energy Systems Consulting 6. Ameren
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1. Accenture 31. Commonwealth Edison 66. FirstEnergy 100. Nexant 132. Skipping Stone 2. Advanced Energy 32. Con Edison 67. FleetCarma 101. North Carolina Electric 133. Smart Electric Power Alliance 3. Alectra Utilities 33. Connected Energy 68. FPL Membership Corporation 134. Smartenit 4. Ally Energy Solutions 34. Connected Energy Limited 69. Franklin Energy 102. NTC 135. Snohomish County PUD 5. Alternative Energy Systems 35. Consumers Energy Company 70. GDS Associates 103. OATI 136. SolarEdge Technologies Consulting 36. Contract Callers 71. Generac 104. Oklahoma Gas & Electric 137. Southern California Edison 6. Ameren 37. CPower Energy Management 72. Georgia Power Company 105. Olivine 138. Southern California Gas 7. American Public Power 38. CPS Energy 73. Google (Nest) 106. Oncor Electric Delivery Company Association 39. Customized Energy Solutions 74. Great River Energy 107. Open Systems International 139. Steffes 8. Apex Analytics 40. Dairyland Power Cooperative 75. GridFabric 108. OpenADR Alliance 140. Sunverge Energy 9. Apogee Interactive 41. DNV GL 76. GridOptimize 109. Opinion Dynamics 141. Tantalus 10. Applied Energy Group 42. DTE Energy 77. GridPoint 110. Opus One 142. Tennessee Municipal Electric 11. APTIM 43. Duke Energy 78. Guidehouse 111. Oracle Utilities Power Association 12. Aquanta 44. E Source 79. Hawaiian Electric Company 112. Orange and Rockland Utilities 143. Tennessee Valley Authority 13. Arizona Public Service 45. E4TheFuture 80. High West Energy 113. Pacific Gas & Electric 144. Tetra Tech 14. Armada Power 46. Eaton 81. Honeywell Smart Energy 114. PECO, An Exelon Company 145. The Brattle Group 15. Austin Energy 47. ecobee 82. ICF 115. Pepco, an Exelon Company 146. Threshold 16. Baltimore Gas and Electric 48. Edison Electric Institute 83. Idaho Power 116. Portland General Electric 147. Tierra Resource Consultants 17. Berkshire Hathaway Energy 49. Efficiency Vermont 84. IGS Energy 117. Powerley 148. TRC 18. Black & Veatch Management 50. Elocity 85. Illume Advising 118. PPL Electric Utilities 149. Tri-State Generation & Consulting 51. Emerson Commercial & 86. Indianapolis Power & Light Co. 119. Public Service Company of Transmission 19. Bonneville Power Residential Solutions 87. Integral Analytics Oklahoma 150. Trickle Star Administration 52. EMI Consulting 88. IPKeys Power Partners 120. Rappahannock Electric 151. TROVE 20. Bristol Tennessee Essential 53. Enbala 89. Itron Cooperative 152. Tucson Electric Power Services 54. Encycle 90. Jackson EMC 121. Resideo 153. Uplight 21. Buffalo Niagara Medical 55. Enel X 91. Landis+Gyr 122. RF Demand Solutions 154. Utility Load Management Campus 56. Energy Federation 92. Leap 123. Sacramento Municipal Utility Exchange 22. Cadmus 57. Energy Solutions 93. Modesto Irrigation District District 155. Vectren 23. Calico Energy 58. EnergyHub 94. National Grid 124. Salt River Project 156. Warranty Design 24. Central Hudson Gas & Electric 59. EnerVision 95. National Rural Electric 125. San Diego Gas & Electric 157. Waseda University 25. Chelan PUD 60. Entergy Cooperative 126. Santee Cooper 158. West Monroe Partners 26. City of Tallahassee Utilities 61. EPRI 96. NB Power 127. Schneider Electric 159. Xcel Energy 27. Clean Power Research 62. ERS 97. New Braunfels Utilities 128. Scope Services 160. Zen Ecosystems 28. CLEAResult 63. Evergy 98. New Hampshire Electric 129. ScottMadden 161. Zeuthen Management 29. COI Energy Services 64. Eversource Cooperative 130. Seattle City Light Solutions 30. Colbun 65. Extensible Energy 99. New York Power Authority 131. Shifted Energy PLMA Load Management Dialogue Why Is Electricity Pricing So Difficult? Between a Rock and a Smart Meter Ahmad Faruqui Bill LeBlanc Derek Kirchner The Brattle Group E Source Consumers Energy & PLMA Exec Cmte The Five “Immortal Objections” to Time-of-Use Rates PRESENTED TO PLMA Load Management Dialogue PRESENTED BY Ahmad Faruqui, Ph.D. May 28, 2020 Copyright © 2020 The Brattle Group, Inc. Rate design never fails to stir up an argument “There has never been any lack of interest in the subject of electricity tariffs. Like all charges upon the consumer, they are an unfailing source of annoyance to those who pay, and of argument in those who levy them. There is general agreement that appropriate tariffs are essential to any rapid development of electricity supply, and there is complete disagreement as to what constitutes an appropriate tariff.” - D.J. Bolton, Costs and Tariffs in Electricity Supply (1938) PLMA - Load Management Dialogue brattle.com | 4 And nothing stirs up controversy better than a plain old time-of-use rate PLMA - Load Management Dialogue brattle.com | 5 The state of play While there is a mountain of empirical evidence that customers accept and respond to TOU rates, skeptics continue to assert the contrary. That’s the primary reason why only 4% of the customers in the US are on TOU rates while nearly 80% of them are on smart meters. Recently, a very respected and seasoned regulator wrote to me that TOU rates are “an exercise in modifying human behavior with little chance of success. Even if successful, they will not yield any tangible reduction in electricity costs.” I have been keeping track of frequently voiced objections to TOU rates since I joined the EPRI Rate Design Study in 1979. The first one used to be the lack of metering technology. That one is no longer in my diary. Here are the five that are in my diary. They have endured for so long that I call them Immortal Objections. PLMA - Load Management Dialogue brattle.com | 6 Objection 1 Objection: While TOU rates might reduce peak load, they will not lower customer bills. Response: Well-designed TOU rates will yield savings to customers even in the short term as customer reduce peak loads and shift their peak usage to off- peak periods. In the long run, the savings will be even greater as customers install new digital devices such as smart thermostats. Additionally, as peak demands are lowered, there will be less need to invest in peaking capacity and that will further reduce costs to customers over the long run. PLMA - Load Management Dialogue brattle.com | 7 Objection 2 Objection: Lower peak demand will not lower transmission and distribution costs since they do not depend on load. Response: Congestion is rising on distribution circuits and that can be relieved by targeted TOU pricing. In addition, TOU pricing can lower the need for T&D investments in the long run. Most ISOs/RTO’s would welcome the demand response created by TOU rates. PLMA - Load Management Dialogue brattle.com | 8 Objection 3 Objection: On-going pilots with TOU rates and other time-varying rates show minimal customer reaction to price signals in changing their load profiles Response: There is a world of contrary evidence on this topic. Customers do respond to TOU rates and lower peak demands while shifting some of that load to off-peak periods. PLMA - Load Management Dialogue brattle.com | 9 Objection 4 Objection: Residential customers are busy with seeing off kids to school in the morning, commuting to work, returning home to have dinner with the family and then making time to watch TV and perhaps do the laundry. Customers have little time or interest in becoming a home energy manager. They just want the lights to come on when they flip the bill and get an affordable bill at the end of the month. Response: While that is true of the vast majority of customers, sound scientific research has shown that, on average, TOU pricing motivates customers to modify their lifestyle and save money. In OGE’s case, they have signed up a fifth of their customers onto dynamic pricing, often enabled with a smart thermostat. On average, these customers are reducing their peak demand by 40% and lowering their bills by 20%. SMUD deployed default TOU rates without any hitch last year. Fort Collins in Colorado instituted mandatory TOU pricing last year. Consumers Energy will begin deploying default TOU rates in June. Xcel Energy in Colorado has filed for deploying default TOU rates this year. SDGE has already done that and PG&E and SCE will begin deploying TOU rates from October onwards. PLMA - Load Management Dialogue brattle.com | 10 Objection 5 Objection: In the developing world, people eke out a meager existence, living from hand to mouth. They are so focused on making ends meet that they don’t have time to focus on responding to TOU rates. Response: Even in the developing world, people are seeking to lower their energy bills and modify their lifestyle to improve the climate of the planet. While we don’t have a lot of evidence from developing countries on the efficacy of TOU rates, there is no reason to think they won’t work there. PLMA - Load Management Dialogue brattle.com | 11 THE POWER OF ECONOMICS brattle.com Why Is Electricity Pricing So Difficult? Between a Rock and a Smart Meter Chief Instigation Agent May 28, 2020 Bill LeBlanc www.esource.com Who Is E Source? ▪ Research and advisory firm with 30 years utility experience ▪ Headquartered in Colorado ▪ Membership-based © 2020 E Source | www.esource.com 14 Framing Pricing Properly Economics People Policy • Are the price • Is it perceived as • Does it meet signals right to fair? equality and create grid • Does it cause fairness goals? efficiency? other costs that • Can it facilitate • Do the retail prices exceed the environmental reflect costs? benefits? goals. • Do economic • Will people • Does it enable decisions include actually customer choice? all costs? understand and • Does it encourage act, while the right improving investments?