Meters, communication and smart rates can bring utilities peak relief

By Betsy Loeff, contributing writer

Ask Roger Gray if he’s seen more utilities express interest in demand-response programs, and you’re likely to see him roll his eyes.

Gray is vice president of business development at GoodCents, a company that runs energy-saving programs for utilities. He says that his team has been putting in as many as 80 hours a week for months — that’s how much interest there is. “And, it seems that every demand response program has some connection to AMI.”

As Gray notes, advanced meters are one of the must-have items for a demand-response initiative. “Contrary to popular thinking, you don’t need to download the data at hourly intervals or even daily. You could download it every month,” he claims. But, you have to be able to record electricity usage according to the time-of-day in which the power was used.

Along with interval-recording meters, Gray maintains that a good demand-response initiative needs the right communication tools in place, because success depends on one element utilities can’t control: consumers. They must “buy into” the program. Following are pointers on communicating demand-response rates in ways that encourage consumers to increase response and cut demand.

Critical thinking
There are many flavors of demand-response, including direct load control and dynamic pricing such as critical-peak rates, which rise dramatically on those few days when the utility faces severe cost increases to meet consumption extremes. Such rates typically are designed to be in effect only about 100 hours out of the 8,760 hours in a year.

Recent research shows critical-peak pricing to be especially effective at helping utilities cope with soaring peak demand. What’s more, experts say that automation to facilitate load-control is key to making critical-peak price signals truly effective.

Dr. Karen Herter is now a senior program analyst for Heschong Mahone Group, an energy-efficiency consultancy. In 2002, she was one of the architects for a two-year, $20 million statewide pricing study conducted in California. Among other things, that research examined consumer response to simple time-of-use pricing versus critical-peak pricing with and without automation. The automation allowed consumers to pre-set appliances such as air conditioners and pool pumps so that these devices would use less energy when a critical-peak pricing signal came in from the local utility.

“Time-of-use rates worked for the first year, but didn’t work for the second,” Herter recalls, while critical peak rates worked both years. Without automation, those rates delivered around a 13 percent reduction in usage. With automation, critical-peak pricing dropped usage between 27 percent and 34 percent.

Automatically better
Even when time-of-use rates were new and on customers’ minds, those rates never inspired more than around a 4 percent drop in usage. Herter thinks she knows why: “Customers aren’t getting any information. No one is beeping them or calling. With a critical-peak price, every now and then you’re sending a signal. It’s like reaching into a customer’s home, shaking that person and saying, ‘Hey, you need to do something right now.'”

“Flipping off the lights – that’s a big price for the consumer to pay,” says Gray of GoodCents. “If you don’t include automation in a price-responsive program, I don’t think that program has a great chance of succeeding.”

Gray is an expert at communicating demand response, and he offers these tips:

Lose “control.” The word “control” does not sit well with consumers, he says. Play up the idea of shifting load to off-peak hours. “It helps the utility avoid building additional power plants. It relieves strain on the transmission and distribution system.” Focus on the benefits of the program, not the load-shedding mechanics of it.

Think green. According to Gray, load-shedding programs that promote the money consumers will save are less effective than those that promote environmental issues. Why? “If you make it about the money and the consumer is getting uncomfortable, he may say it’s not worth the $5 he’s saving that month to participate. But, if consumers join the program because they believe it’s important to protect the environment and save valuable resources for their children, why would they defeat load-shedding devices? They’d be going against their own principles.”

Sell proudly. Gray says he’s seen consumers thank utilities for offering demand-responsive rates because those customers understand the environmental benefits. Don’t be bashful when promoting demand-response pricing, he says. Pitch it as a way the utility helps consumers do something good for the environment. “I don’t know if utilities consider these programs a customer service, but they should,” he maintains.

Heschong Mahone’s Herter adds another communication pointer. She recommends that utilities relate their pricing programs to something consumers already know: time-of-use telephone rates. According to her, “Consumers understand that, during certain times of the day, using the cell phone may cost more.” With demand response , so will electricity, she concludes.


Betsy Loeff has been freelancing for the past 14 years from her home in Golden, Colo. She has been covering utilities for almost four years as a contributor to AMRA News, the monthly publication of the Automatic Meter Reading Association.


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