By Cheri Warren and Benjamin Ryan, National Grid
The utility industry is reaching an inflexion point in smart tariff and metering initiatives’ development, and enhanced customer communications will be vital to the programs’ successes.
Many U.S. utilities are designing smart tariff strategies and introducing smart metering devices to market. Some are conducting pilot programs to assess effects on customer use patterns, bills and peak demand. While it is early in the industry’s evolution to these new programs, the next five years will be critical.
Utilities should consider the interim period’s opportunity: The companies could work to gain customer acceptance of both the new technologies and the industry’s shift to a smarter grid. Clear, effective communications between utilities and customers could achieve this goal. If communications are ineffective, utility-customer-regulator relationships could be compromised.
Innovative Communications Programs
The individual utilities’ communication approaches about smart tariff and metering programs will be varied.
National Grid, for example, scheduled a public summit in Worcester, Mass., to discuss smart energy programs, including smart tariffs and metering. The company used appreciative inquiry methods to engage residents in planning and designing the programs. National Grid believes the approach will encourage customers to participate. The company will work with customers to develop a smart grid marketing strategy, determine how to communicate effectively and identify the preferred program options’ formats.
PowerCentsDC, a smart meter program sponsored by a consortium of agencies in the District of Columbia in partnership with Pepco DC, conducted a time-of-use pilot on pricing incentives offered with smart meters. The pilot also looked at smart thermostats and customer price signals to indicate demand shift. According to the program’s Sept. 2010 final report, the most popular smart tariff, critical peak rebates, reduced regular and low-income customers’ peak loads by 13 percent and 11 percent, respectively, creating bill savings. More than half of the customers (52 percent) preferred receiving usage data and alerts in their monthly bills. Other preferences included mailed reports (20 percent), email (14 percent) and the utility website (14 percent).
Lack of customer understanding with program terms has created issues with some pilots. In one case, the utility did not achieve a measurable change in satisfaction or peak demand. In another case, the program achieved its demand-shifting goal, but consumers and regulators reacted negatively when customers’ heating, ventalation and air conditioning (HVAC) systems were remotely shut off for several days during a heat wave.
For most utilities, the monthly bill is the primary customer communications channel. Utilities should use the monthly bill to convey energy choice information to customers.
Utilities should strive to make the customer’s electric bill clear and easy to understand. Line items in the bill should reflect how specific energy purchases contribute to total costs. The line items could include energy consumption associated with different tariffs and the costs to operate common appliances. Utilities should work with their regulators to find ways to develop these simple, itemized billing solutions.
As a new energy market evolves, utilities should develop optional billing mechanisms which allow customers to personalize service alternatives on in-home display units, Web portals or smartphones. Consumers are already accustomed to personalizing telecommunications services and can be expected to respond favorably to utilities’ approaches. These interactions will also help companies know customers better.
Make Customer Tools Easy to Use
When designing tariff programs and evaluation tools, utilities must decide how much data to present to the customer. Ideally, the data should be easy for both the utility and the customer to manage. In 2008, Baltimore Gas & Electric (BGE) conducted a critical peak price pilot study that conveyed price changes with a simple in-home display and color-coded symbols. According to an April 30, 2008, BGE presentation, “BGE’s Smart Energy Pricing Pilot: Summer 2008,” the approach reduced customer loads by 23 percent to 27 percent during peak times.
Conversely, unnecessary information might be counterproductive. For example, while large commercial customers often have dedicated staff to conduct tariff what-if scenarios, residential or small commercial and industrial (C&I) customers don’t have those resources. The participation of residential and small C&I customers is important, however, especially in markets where these customers are responsible for the peak load majority.
Utilities should assist customers with automated tools and simplified what-if programs that the customers can use to evaluate tariff options before commitment. National Grid is planning a shadow billing feature for a pilot program; the feature will enable bill comparisons between smart tariffs and normal billing options. The company expects the smart tariff savings will convince customers of the program’s value.
Getting Stakeholders Engaged
The replacement of aging utility infrastructure with smarter systems will introduce far-reaching change. As companies upgrade their infrastructure, they need to explain to customers why the changes are being made and how customers will benefit.
Right now, the public has little understanding of utility infrastructure’s limitations. Without this knowledge, it’s difficult for consumers to appreciate smart grid improvements. Consumers can develop an interest in infrastructure, however. They’ve demonstrated this interest with wireless networks.
Because utilities depend on customers to support ratemaking and use new devices and tariffs, customer acceptance is important. Utilities could gain support by engaging customers before they complete changes.
When explaining infrastructure upgrades to the public, utilities should set appropriate expectations. Companies should announce details about each deployment phase, the process and the services it will facilitate. If communications are effective and well-timed, customers may support the changes and participate in the programs.
Additionally, the introduction of smart tariffs and metering could bring regulators into the customer communication process. This creates a new opportunity for utilities, customers and regulators to help shape future services together. It is critical that utilities pursue this vision. The process can be creative and stimulating for all participants. Each party understands the issues more completely, and the process engages everyone in both program design and implementation.
Cheri Warren is an IEEE Division VII director and National Grid’s asset management vice president working on smart grid, transmission and distribution asset ownership, asset information management and reliability strategy.
Benjamin Ryan is National Grid’s smart grid department analyst working on strategies for the utility’s smart grid and demand response programs.