Programmable Thermostat Regulations in California: Big Brother or Control Freaks?

Lynne Kiesling

Over the past week there has been quite a discussion online of the California Energy Commission’s proposal requiring mandatory customer thermostat reponse to emergency demand reduction signals. This New York Times article from Friday also discusses the CEC proposal, as does this ABC news affiliate story from San Francisco. See also the discussion at Cafe Hayek, Samizdata, and the exceedingly clear and helpful (as always) Jonathan Adler at The Volokh Conspiracy, who was kind enough to post a link to the actual proposal (the section of interest is pp. 61-63).

In a nutshell, the CEC is revising the state’s building code with an eye toward enhancing the energy efficiency standards with which buildings are built. As part of this revision, the CEC brought together a stakeholder team comprising industry experts who have also been involved in the voluntary efforts within the electricity IT universe to establish industry standards for interoperability and facilitating data communications (disclosure: one of the advisors is a friend of mine and a fellow member of the GridWise Architecture Council). Much attention has already gone into doing this with the meter, developing interoperable advanced metering infrastructure (AMI). This specific effort focuses on the programmable communicating thermostat, or PCT. Unlike your old dial thermostat or the programmable digital thermostat you can buy at the hardware store, the PCT is a fully-enabled two-way digital communication device. It can receive data, be programmed to respond to data, and send data back about its actions. For example, a PCT can receive a price signal, be programmed with a set point and trigger prices at which to change the set point, and then it can change its settings on your behalf depending on how you’ve programmed it. The CEC law only requires the PCT to be one-way communicating.

The PCT is the most cost-effective and forward-looking way to break down the monopoly that the distribution utilities currently have in providing retail electricity services to end-use customers. Without the PCT, a lot of dynamic pricing, product differentiation, and other market-based contracts and mechanisms are impossibly costly or simply not feasible. In conjunction with the two-way communicating meters (AMI) that the distribution utilities in California are installing, PCTs open the door to the type of retail choice and price-responsive end-use technologies that I discussed last week in my post about the GridWise Olympic Peninsula Project. Being able to program the thermostat to respond to signals, especially price signals, is a good thing. The CEC has taken part in a multi-year stakeholder process to establish the functionality and interoperability requirements of both the AMI and the PCT, incorporating the open architecture and interoperability principles of the GridWise Architecture Council (of which I am a member).

In the current regulatory environment, we are stuck in a chicken-and-egg limbo. If we do not mandate the installation of PCTs to accelarate “fleet turnover” in building thermostats, the distribution utilities have no incentive to install them or offer them to customers. But if there are no PCTs, the demand for innovative retail products and services is less likely to develop. We can’t have the retail innovation without the technology, but the parties who currently have the retail relationship have little incentive to engage in retail innovation, and they therefore do not value the technology. From a liberty and coercion perspective it’s an imperfect policy in an imperfect world, but it’s one that is likely to break the chicken-and-egg cycle and let the camel’s nose of retail competition under the tent.

That said, though, I find one specific piece of language in section 112(c) extremely troubling (and the links above indicate that I am not alone):

Emergency Events. Upon receiving an emergency signal, the PCT shall respond to commands contained in the emergency signal, including changing the setpoint by any number of degrees or to a specific temperature setpoint. The PCT shall not allow customer changes to thermostat settings during emergency events.

You should note here that, although the CEC document is ostensibly for public consumption, it is using high-level industry jargon in this discussion. An emergency means a Stage 2 alert or worse; a Stage 2 alert occurs when supply reserves available to the system in an are only 5 percent larger than the anticipated demand in that hour (called an operating reserve shortfall). If the authors of the document were sensitive to the public’s knowledge and interests they would have bothered to define the conditions under which a customer would receive an emergency signal.

Note also, though, that the California ISO annual report for 2006 indicates that even in the record-breaking heat wave in July 2006, there was only one Stage 2 alert (and no Stage 3 alerts). So these “emergency signals” are extremely infrequent, and are more likely to become even more infrequent as the price-responsive demand capabilities and retail choice enabled by the PCT reduce the strains on the system in peak hours.

That said, however, I disagree with this provision requiring mandatory, automated emergency response of all customers. I find it heavy-handed, and although its intention of ensuring system reliability is noble, its methods are not. Coercive infrastructure use requirements of this sort should not trump individual autonomy and liberty, particularly when this very same technology creates the opportunity for something that is a superior strategy — retail choice and the ability for consumers to determine for themselves how valuable it is for them to pay the price to consume the power in that hour. Hours that are likely to have Stage 2 alerts are precisely those hours that are likely to have high wholesale electricity prices. Consumers who choose dynamic pricing contracts that enable them to see those high prices (as well as the low, low ones overnight) and have the AMI and PCT technologies to automate their response to those price signals will do so voluntarily, without heavy-handed coercion.

We do not yet have the evidence to indicate whether that responsiveness is likely to be enough to avoid most service interruptions, but that is no reason to resort to the use of such coercive force. If anything, the 2006 experience of one Stage 2 alert is an upper bound on the expected magnitude of the problem, and increased technology and voluntary participation in differentiated retail contracts will reduce that incidence even further.

Furthermore, from a marketing perspective, mandatory direct load control is a sure-fire way to make sure that consumers look at smart grid technologies with suspicion. Even if it were only on that grounds, I would oppose such a provision, because it taints all of the hard smart grid work that the GridWise Architecture Council and other groups have been doing.

The online discussion has had an effect (as have other means of individuals communicating dissatisfaction with this idea!). On Friday the CEC indicated that they will modify that provision of the requirements, making them voluntary.

The fundamental question is this: who gets to decide? Does the individual retain autonomy, or not? This technology can be used for both good (prices to people, and their devices) and evil (mandatory direct load control). Our vigilance is important in ensuring that we can achieve the former without giving in to the control-oriented desire to do the latter.


15 thoughts on “Programmable Thermostat Regulations in California: Big Brother or Control Freaks?

  1. From the NYT article “radio-controlled device that will be required in new or substantially modified houses and buildings to manage electricity shortages.”

    If true then the a/c shutdown would only be applicable to new and substantially modified home and business, and not the rest of the public?

    If true, this would be out of order. The state of CA should first mandate that all utility promote and provide the smart switches on all homes and businesses. After education, customers can have the switches installed voluntarily.

    This would promote a wider use of load management which could avoid the a/c shutdown on just newer and sub. improved houses and buinesses when peak capacity.

    Why doesn’t the state of CA promote a widespread program like NOVEC, an electric co-op in the state of VA.

    Click http://www.novec.com/page.cfm?id=544 to see the NOVEC program.
    CLick http://www.novec.com/documents/LM%20Brochure.pdf to see the FAQ.

    The NOVEC LMP seems alot fairer and stands a better chance to manage load than the CEC proposal.

  2. From the NYT article “radio-controlled device that will be required in new or substantially modified houses and buildings to manage electricity shortages.”

    If true then the a/c shutdown would only be applicable to new and substantially modified home and business, and not the rest of the public?

    If true, this would be out of order. The state of CA should first mandate that all utility promote and provide the smart switches on all homes and businesses. After education, customers can have the switches installed voluntarily.

    This would promote a wider use of load management which could avoid the a/c shutdown on just newer and sub. improved houses and buinesses when peak capacity.

    Why doesn’t the state of CA promote a widespread program like NOVEC, an electric co-op in the state of VA.

    Click http://www.novec.com/page.cfm?id=544 to see the NOVEC program.
    CLick http://www.novec.com/documents/LM%20Brochure.pdf to see the FAQ.

    The NOVEC LMP seems alot fairer and stands a better chance to manage load than the CEC proposal.

  3. Re: “Hours that are likely to have Stage 2 alerts are precisely those hours that are likely to have high wholesale electricity prices.”

    At least if the wholesale market rules appropriately price emergency actions. But it can’t be assumed that the wholesale price rules appropriately reflect scarcity during emergency actions, so demand response program developers should be sure to review such rules.

    I hope it is now pretty obvious that mandatory direct load control is a deal-killer for consumers. In any case, as the technology develops and spreads, I suspect that it will be cheap enough to buy all the response that a utility could need.

  4. “Big Brother or Control Freaks?”

    Is that kind of like asking whether California regulators are a threat or a menace?

  5. Floodguy is right that the distinction between old and new construction is yet another troublesome issue in this eye-catching but misguided proposal.

    As usual when the government tries to step in in some ham-handed way, this may result in an overall worse posture, one that raises rents in older buildings. Later, people will put off retro-commissioning and renovations to make sure they avoid the inevitable extension of this regulation into those domains.

    Perhaps a commission that is always looking backward at recovery of sunk costs is simply unable to shift gears and look at incentives…

  6. The root issue is that the government of the state of California has actively and deliberated discouraged new generation both within the state and outside the state.

    The government, through misgovernance and intention, have created electrical power limits. Reserve margins are substantially reduced over the days of full regulation of utilities.

    Now that deliberate shortages are present, the government now wants to amelorate the consequences by taking control within your home or busines.

    The issue is not “control or blackouts.” The issue is electricity availablity or rationing.

    The citizens of this state see this real issue and have responded that the government’s job is to ensure adquate electrical power for its citizens.

  7. The root issue is that the government of the state of California has actively and deliberated discouraged new generation both within the state and outside the state.

    The government, through misgovernance and intention, have created electrical power limits. Reserve margins are substantially reduced over the days of full regulation of utilities.

    Now that deliberate shortages are present, the government now wants to amelorate the consequences by taking control within your home or busines.

    The issue is not “control or blackouts.” The issue is electricity availablity or rationing.

    The citizens of this state see this real issue and have responded that the government’s job is to ensure adquate electrical power for its citizens.

  8. Mandatory PCTs will produce a demand for devices to fool the PCTs. E.g. a small device which keeps the thermostat 5 degrees warmer than the rest of the house.

  9. If the central authority can control your home thermostat, then any knowledgable hacker can do so as well. Can you imagine the havoc that would be caused by the plethora of those who enjoy messing with other people’s lives?

  10. Chicken or egg indeed. It would be nice to have a fluctuating energy price based upon availability vs demand and it would be concomitantly excellent to have a device like the PCT that allows you take advantage of/react to that fluctuating price so that you could adjust your energy usage to better meet your budget as well as your needs. My belief is that we would need true de-regulation with dynamic pricing first; the presence of dynamic pricing would make the desire for a PCT obvious and they would not only be desired for new home construction but would be flying off the shelves of Home Depots (if not through sales from the consumers’ energy provider of choice).

    The real first priority must-have though, is for government to stop hindering the construction of more and more electricity production. We need more electricity and there’s no good reason why we shouldn’t have more. We need to demand that government stop getting in the way of progress and get out of the utility business and give it over to private enterprise. As long as we’re getting our electricity through government benevolence we’re going to continue acting like castaways deciding which body parts we can lop off and eat to continue survival.

  11. Chicken or egg indeed. It would be nice to have a fluctuating energy price based upon availability vs demand and it would be concomitantly excellent to have a device like the PCT that allows you take advantage of/react to that fluctuating price so that you could adjust your energy usage to better meet your budget as well as your needs. My belief is that we would need true de-regulation with dynamic pricing first; the presence of dynamic pricing would make the desire for a PCT obvious and they would not only be desired for new home construction but would be flying off the shelves of Home Depots (if not through sales from the consumers’ energy provider of choice).

    The real first priority must-have though, is for government to stop hindering the construction of more and more electricity production. We need more electricity and there’s no good reason why we shouldn’t have more. We need to demand that government stop getting in the way of progress and get out of the utility business and give it over to private enterprise. As long as we’re getting our electricity through government benevolence we’re going to continue acting like castaways deciding which body parts we can lop off and eat to continue survival.

  12. yes, it is heavy handed to disallow customers to override. And the benefit gained for this lockout is probably very small in practice.

    But (playing devil’s advocate) if the alternative is no power at all, which makes sense? spread the impending outage over thousands of thermostats or experience an outage that could de-stabilize the grid and result in bigger problems.

    I also agree with Mike, this technology will spread, so more (voluntary or price-driven) demand response will become available.

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