Residential electricity bills in Kern County will soon undergo a fundamental change designed to support California’s shift to renewables by charging people more money for electricity consumed during peak hours and less the rest of the day.
The shift to “hour-of-use” rates offers taxpayers lower or higher monthly bills, depending on their success in avoiding the use of air conditioning and other household appliances late in the day. – midday to early evening. Customers will be compensated throughout the first year if that doesn’t work, and they can opt out at any time.
Concerns for customers have blunted the “TOU” tariffs put in place by Pacific Gas and Electric Co. and its neighboring Kern County, Southern California, Edison, so they are milder than the tariff plans used by some other utilities. It remains to be seen whether the change goes far enough to persuade consumers to adjust their habits.
The opposite risks are at stake: Taxpayers unable to change their habits could be hit by surprisingly high bills. But if the financial rewards for success are too low, people might decide that their adjustments aren’t worth it.
PG&E and SCE are reaching out to customers to inform them of upcoming changes so that they are not stung by hour-of-use rates. Representatives of the two utilities stressed that they are not making money on change.
International electricity tariff design expert Ahmad Faruqui has expressed concern that California’s relatively small utility rate differentials could backfire, as he told Puget two decades ago. Sound when consumers who had worked hard to reprogram their consumption gave up after experiencing only modest savings.
He said pilot projects in California and deployments in other states have shown that TOU price differentials larger than those introduced by PG&E and SCE have been more successful in modifying costs for consumers.
“It’s like Macy’s making a sale but it’s all 5% off. I mean, who’s going to go?” asked Faruqui, energy economist and director of international consulting group The Brattle Group Inc.
But Mike Campbell, program director for the Electricity Pricing and Client Programs Branch of the CPUC’s Office of Public Advocates, said via email that there is evidence that modest price differentials are more effective. and that sharp increases in peak tariffs can have unintended negative consequences.
“More extreme differences do not correlate with significantly stronger responses from customers,” he wrote.
The shift to hour-of-use tariffs, or “TOU,” was ordered by the California Public Utilities Commission and developed with input from various stakeholders, to improve the reliability of the state’s electricity grid as petroleum-fired power stations are gradually being replaced. by intermittent sources of electricity such as solar and wind power.
This capacity was one of the original reasons for replacing traditional electricity with so-called smart meters introduced locally over a decade ago. They gave utilities the ability to bill people based on when they use electricity, as opposed to their total consumption in any given month.
Some local customers are already benefiting from TOU tariffs, including rooftop solar panel owners and new customers who have chosen this option to save money.
PG&E plans to upgrade some 50,000 Kern customers to TOU pricing in November as part of an effort that began in April and will involve up to 2.5 million taxpayers by March. Some customers including those with subsidized tariffs will not be automatically transferred to the new tariffs, which for the most part increases the cost of the energy used between 4 p.m. and 9 p.m.
Its actions are partly based on a 2018 demonstration project involving 150,000 residential customers. He found that over 80 percent chose to stay on the program for more than a year.
The peak rates it introduces for summer bills vary based on usage, but are no more than 23% higher than off-peak rates. In winter, the difference does not exceed 7 percent.
So far, only 17% of its general clients have opted out of the new program, he said. In Kern, around 55% of people who have tipped over so far have refused to participate in the TOU program, and all were customers with a solar roof. In total, nearly 40,000 of its residential customers in Kern are on a TOU plan.
“We have incorporated a huge amount of customer feedback from our first transition phase in 2018 into the full rollout underway, as well as a previous pilot in 2016 that tested different pricing designs,” the company said via e- mail. “PG&E offers optional price plans with higher differentials for customers who want to choose a different plan. Our goal as part of the statewide effort continues to be the creation of a cleaner energy future.
SCE’s base rate differentials are more dramatic: around 60% for customers who choose a 4:00 p.m. to 9:00 p.m. peak and 100% for those who choose a 5:00 p.m. to 8:00 p.m. window designed to be short and therefore increase traffic. flexibility of subscribers.
So far, the utility has found that customers with a higher three-hour price differential have on average higher energy savings than those with the softer five-hour differential.
Already, SCE has moved over 10,000 of its Kern County customers to TOU tariffs, and in October, it plans to begin transitioning another 28,000.
Andre Ramirez, SCE’s senior pricing design and research advisor, said the utility is trying to balance the needs of customers who cannot reprogram their energy use or are unaware of the change. .
“We don’t want to hit them with unexpected high bills,” he said. But at the same time, he said, “If you don’t give a big enough price signal, in general, customers are less likely to respond. “
Larger rate differentials are in place in the Sacramento Utility District, which, unlike PG&E and SCE, is not owned by investors and is not regulated by the CPUC.
SMUD’s differential between peak and off-peak summer prices is 143 percent. The highest rates do not apply on weekends or holidays.
The utility said in an update about a year ago that its TOU rates performed better than expected in terms of savings and loyal customer share of the switch. He predicted $ 3.7 million in savings but got $ 5 million, and instead of the 5.8 percent load reduction he expected, the result was 8 percent.
Faruqui, the energy economist, said that utilities’ success in moving people to TOU tariffs largely depends on their customer outreach efforts, which he noted can vary widely. .
“Without education, it’s a sure-fire prescription for disaster,” he said.