Dynamic Electric Power Prices for Residential Customers in Illinois

Michael Giberson

From the Danville, Illinois Commercial-News, a report of a two-year old dynamic power price program for residential customers of Ameren in Illinois:

The program offers customers the ability to track in real time, via the Web, the day-ending regional commodity price of electricity. And as the rate fluctuates, participants can adjust their usage to avoid peak rates the following day.

“You don’t have to turn everything off and you don’t have to sit around in the dark,” said Stephanie Folk, a spokeswoman for CNT Energy….

She said it’s more a matter of knowing when the prices are high or are going to go higher, and then saving major chores such as laundry for a less-expensive part of the day.

“Maybe you just turn up the air conditioner a couple of degrees at certain times,” she said.

The reporter suggests that customers “can save nearly 15 percent”, but doesn’t indicate if that is a maximum or mean value.

Probably nothing new in the article for regular KP readers, but in a world in which people think such pricing programs are impossible — politically or practically — the mere existence of a two year old program offers a proof.

The next step is to automate the adjustment processes.  For example, if the air conditioner’s thermostat setting was a function of price rather than a fixed number, the power customer could capture savings without needing to check prices nightly.  This kind of thing is already possible, but hampered by the current lack of energy data communication standards to allow thermostats to communicate to other household systems, the power meter, and the consumer’s energy retailer.

Lynne could probably name devices that can already do this kind of thing, and describe the current state of progress on data standards, too.

4 thoughts on “Dynamic Electric Power Prices for Residential Customers in Illinois

  1. As an eligible customer, the monthly fee of $2.25 that participating consumers have to pay really annoys me. Shouldn’t they be encouraging us to do it?

    Anyway, we already do our laundry on the weekends, and the only time we turn on our air conditioner is at times when the rates spike (hot summer afternoons), so I don’t think it would reduce our rates. According to the Ameren site, we’re already paying a lot less than our neighbors.

  2. As the story (and the CNT folks managing the program) points out, not everyone will save. But I’m with you on the participation fee. The customers involved are likely to be a little more energy conscious, and especially with a price incentive are more likely to moderate consumption on peaks, thus reducing system costs. More to the point, participation would reduce the fuel price risk to the local utility.

    Of course for a regulated utility, moderating their system costs and reducing fuel price risk likely lowers there overall profits. Maybe that is why the regulated firm and regulators want the participation fee.

  3. I should say upfront that I am one of administrators of the Power Smart Pricing program. I am also a daily reader of KP. Great work.

    As far as savings are concerned, the average savings for our entire customer base is 13% since the beginning of the program in Jan 2007. Over time the savings levels has fluctuated as power prices change, but we’ve had a very good run lately. In 2009 with the wholesale market price for electricity being so low, the average savings for customers has jumped to 27%. Ameren’s flat rates went down a bit in June which has cut into those savings a bit during the summer but since summer power prices haven’t increased as much as in past summers, the numbers continue to look really good. Not paying a risk premium for a flat rate is what’s making the program attractive to customers.

    We hear your concerns about the participation fee and do agree is one disincentive to participation. The history of the fee is that the legislation that enabled this program required utilities to spread the costs of it between participants and residential non-participants. Since Ameren doesn’t yet have smart meters, there was a need to figure out how to pay for the interval recording meters that get installed for participants on the program as well as the program administration costs. Absent this program, Ameren charges $5 a month for this type of meter. The $2.25 fee was a negotiated reduction with the rest of the costs being spread out across the residential rate base via a rider (currently about 6 cents a month). Long term we hope that the cost of meters gets dealt with in different ways as AMI/Smart metering plans get determined. If it were a common cost, the incremental cost of this program would be substantially lower

    With the mention of fuel pricing, we have unbundled utilities in Illinois that don’t own their own generation but rather procure power for flat rate customers via the Illinois Power Agency (and some legacy contracts from our ill-fated reverse auction). Therefore the fuel price risk isn’t really a factor or concern to the utility.

    We also do like automation to help customers, but it of course comes at a price. We’ve been really proud of what our participants do without automation, they have a good elasticity of demand to price. (see: http://www.cntenergy.org/real-time-electricity-pricing.php for the evaluation reports) We are working in areas where internet usage isn’t that high

    Our organization is definitely one that centers on environmental policy, but this program has really proven to attract all types of customers. Most are looking to save some money and are not that concerned with energy consumption or its environmental impacts. In fact, most of our customers don’t even use computers on a regular basis. Automation would help to a degree, but our customers have shown that simple price signals have been able to work on their own. See the evaluation reports at: http://www.cntenergy.org/real-time-electricity-pricing.php. Our participants don’t think of themselves as advanced or cutting edge. It’s simply people realizing that variable pricing is a better option for them.

    I write our blog over at http://www.powersmartpricing.blogspot.com. Come over and check it out if you want to follow our program a little more. For example, we are particularly excited about our new use of twitter to broadcast prices.

    – Matthew Scallet – Communications Associate

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