Smart Pricing for the Smart Grid

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(2)

Introduction

Rick Morgan

Commissioner, D.C. Public Service Commission Chair, Smart Meter Pilot Program, Inc.

(3)

History of the District’s

Smart Metering Pilot

• 2002: Pepco/Conectiv merger

settlement earmarks $2M for

“smart metering pilot”

• 2005: SMPPI created, representing

five D.C. entities:

– D.C. Office of the People’s Counsel – Pepco

– D.C. Public Service Commission – D.C. Consumer Utility Board

(4)

History of the District’s

Smart Metering Pilot (cont.)

• 2005-6: consultants hired to design and

implement residential smart meter pilot:

– Chris King, eMeter Strategic Consulting

– Patti Harper-Slaboszewicz, UtiliPoint Intl/Bass & Co

• 2007: Meters and PCDC rate designs

approved by PSC; participant recruitment

& implementation begins

• July 2008 - October 2009: live

billing of PCDC participants on three

types of dynamic pricing

(5)

History of the District’s

Smart Metering Pilot (cont.)

• 2010: PCDC completion

– final report forthcoming late summer

• 2007 - 2010: Pepco proposes

District-wide:

– AMI deployment – dynamic pricing

– AMI-enabled direct load control

• 2010: PSC approves Pepco deployment

of AMI

(6)

Unique Features

• Integrated approach to smart grid

experience for participants, including:

– Dynamic pricing

– Energy information feedback

– Automated controls (smart T-stats)

• Broad stakeholder involvement

– Utility – Regulators – Consumer advocates – Labor

(7)

• Side-by-side testing of three

distinct dynamic pricing plans

• Strong emphasis on customer

education

• Focus on low-income population

• Location in the Nation’s Capital

– National visibility

– Participation by national policymakers

(8)

PowerCentsDC Highlights

• Results: Customers responded!

– All customer segments reduced peak loads in response to price signals

– Findings generally consistent with other smart metering pilots

– Results provide useful insights re:

• customer segments • pricing methods

(9)

• Overwhelmingly positive feedback

from PCDC participants

• National recognition: award from Assn of

Energy Service Professionals (AESP)

– “Outstanding achievement in pricing & demand response, 2010”

• ARRA funding award received by Pepco

(2010)

• PCDC results will inform District’s smart

grid policy going forward

(10)

Summary of Today’s Briefing

• Understanding the customer (OPC/CUB)

• Preview of final PCDC results

(eMeter/Bass & Co)

• Labor perspective (IBEW)

• Lessons learned & the way forward

(Pepco)

(11)

The Commitment to Understanding

and

Empowering the Consumer

Laurence C. Daniels, Esq. Office of the People’s Counsel

(12)

Smart Grid Success Principles

Consumers are the most important

component of the smart grid.

The most important investment in the

smart grid is the education and

empowerment of consumers.

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Consumers Want to Know

• Why do we need the smart grid?

• What is the smart grid?

• What benefits are in it for me?

• How to use it?

• How will this be paid for?

Consumer education is an ongoing

conversation.

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Combined Education

Allows consumers to

interact with all

stakeholders at one

time

Hands on learning

Allows stakeholders to

understand the

concerns of consumers

Consumer OPC PSC CUB PEPCO IBEW

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Empowerment Tools

• Available at

implementation

• Easy to understand

• Simple to use

In-home displays Smart Thermostat

Monthly bill Web portal

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The Commitment to Understanding

and

Empowering the Consumer

Herbert Harris, Jr.

(17)

Going Forward

Listening to consumers’ concerns and

incorporating solutions will make the Smart

Grid - SMARTER.

The smart meter is the first step by which

many consumers will experience the

(18)

Smart meters have the potential

to move people from just being

consumers to citizens that

consume and even energy

producers through net-metering.

In the future, the smart meter

could be ranked among the top

five household information

devices along with telephone,

computer, and television.

(19)

Going Forward

System reliability and

infrastructure needs must be

addressed in conjunction with

the implementation of a Smart

Grid program.

Consumers will spur innovation

and technology through

requesting specific services or

hardware to meet their needs.

(20)

Going Forward

System reliability and infrastructure needs

must be addressed in conjunction with the

implementation of a Smart Grid program.

The overall experience and design of a

Smart Grid program, including rates and

technical support, will be critical to mitigate

consumer apprehension.

(21)

Going Forward

A positive experience and tangible benefits

will encourage consumers to make

additional household investments in the

name of conservation.

The overall experience and design of a

Smart Grid program, including rates and

technical support, will be critical to mitigate

consumer apprehension.

(22)

Going Forward

Electronic interfaces such as in-home

displays and smart thermostats should

not diminish customer service.

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Going Forward

The Smart Grid is not a science project,

but a change in ideas and interactions,

with real-life consequences.

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Program Overview

and

Results Preview

Chris King President

eMeter Strategic Consulting

(25)

Who is eMeter Strategic Consulting?

• Anaheim Public Utilities - Turn-key Spare the Power Days critical peak rebate program

• PG&E - Smart meters for PG&E’s customers

above 200 kW representing $3B annual revenue • California Large IOUs - Data management for the

California Statewide Pricing Pilot • PowerCentsDC™ – Project design,

implementation and operation for Washington D.C. smart meter/thermostat pilot

• Ontario Smart Price Pilot – Project design,

implementation, and operation for time-of-use and critical peak pricing pilot

• Southern Company – Integrated AMI-distribution automation pilot

(26)

Who is Bass & Company?

– Privately owned management consulting firm serving the electric, gas and water utility industries only

– Founded in 1997 serving utility company executives providing experienced guidance and practical business solutions.

– Size and Focus of the Firm

» 70 consultants with deep industry experience • Average 20 yrs in the industry

• Former Utility Execs, Industry Thought Leaders, Delivery Experts

» Open to small and medium-sized engagements

» Deliver large engagements leveraging business partners • Independent’s with specific expertise

• Benchmarking and performance management experts

• Product & Technology experts

“We listen, we

execute, we

leave”

(27)

PowerCentsDC Case Study

• Smart Grid pilot

– About 1,000 residential customers throughout District of Columbia

Integrated “Smart” approach

– Consumer view

• “Smart,” dynamic prices: Critical Peak Prices, Critical Peak Rebates, Hourly Prices

• Energy information feedback: mailed Energy Reports, In-Home Display, Web portal

• Smart appliances: automated control via smart thermostats

– Energy provider view

• Smart meters recording hourly data, retrieved daily

• IT platform for new functions, interface to existing IT systems

Consumers had ability to manage their energy costs

– By shifting use from peak to other times – By reducing total electricity use

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Program Design

• Test goals

– Test plan by Frank Wolak, Professor of Economics at Stanford – How much do consumers reduce peak demand?

– How much do consumers save energy with their new tools? – How do consumers feel about the program and features?

– Statistical analysis via random sample of control vs. treatment • Participants selected randomly

– Recruitment by mail

– Sign-up by phone call or on website, www.PowerCentsDC.org • Customer groups

– Each customer offered only one price plan (CPP, CPR, or HP) – $100 thank-you payments for CPP and HP

– No payment for CPR (no-risk)

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Critical Peak Price and

Critical Peak Rebate

• Standard rate

–Flat for energy pricing, inverted tiers for other services

• Critical peak pricing (CPP) – CP days dispatched 10-15 days

per year

– Prices 5x average for four hours on these days

• Critical peak rebate (CPR) – “Carrot” instead of “stick”

– Customer earns rebates during critical peak hours by reducing usage below baseline

– Also called Peak Time Rebate • Price notifications

– Via automated phone call, email, or text page -$1.00 -$0.80 -$0.60 -$0.40 -$0.20 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 CPP Energy Prices CPR Energy prices Average price Rebate for kWhreduction CPP price Discount price

Price comparison on critical peak days

Inverted block prices

(30)

$0.00 $0.06 $0.11 $0.17 $0.22 $0.28 $0.33 $0.39 7/22/08 10/20/08 1/18/09 4/18/09 7/17/09 10/15/09 P ri ce pe r kW h

Hourly Pricing

Lehman Bros. Bankruptcy and Credit Crunch Standard Offer Service Price

August 2009 Heat Wave

Real-time pricing

• Varies hourly according to PJM market price

Quarterly adjustments to revenue neutrality multiplier

• Prices were lower than SOS price 95% of hours

• Expectation was about 65%

Notifications provided prior to high-price days

• Target of 15 days per year • 22 actual events

Price ranges per kWh

• 2008: $0.02 to $0.37 • 2009: $0.00 to $0.29

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Recruitment

• Random selection • Single letter • CPR most popular Customer Group Recruitment Response 95% Confidence Interval Standard Customers 6.2% +/- 0.35% All-Electric Customers 7.2% +/- 0.64% Standard RAD Customers 8.0% +/- 1.18% All-Electric RAD Customers 6.4% +/- 1.46% Weighted Average 6.6% Pricing Option Recruitment Response 95% Confidence Interval

Critical Peak Pricing 6.5% +/- 0.52% Critical Peak Rebate 7.4% +/- 0.49 %

Hourly Pricing 5.5% +/- 0.49%

Weighted Average 6.6%

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Recruitment Brochure

• CPR sample

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Sample Distribution

• Random sample

• Entire city

• All eight wards

• All housing types

• Single family • Multi-tenant

• All demographics

• Income • Education © eMeter Corporation, 2010

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Sample Groups

SMPPI specifically recruited limited-income customers to participate in the pilot for a more effective cross-section of the District.

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• Prior to going on the “smart prices”, participants received a Welcome Kit

– “Smart price” reminder description – Refrigerator magnet

• Three informational meetings

– One for each pricing group

• During the course of the pilot

– Electric Usage Reports

– Monthly energy savings tips

– Consumer engagement website – Smart thermostat in home display

• Blog

Participant Education

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Electric Usage Report

Comes each month with bill

Shows detail on usage

• By day

• During critical periods

Shows detail on spending

• In parallel with usage

• Tier 1 and Tier 2 costs

Colorful graphs for quick

reference

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Consumer Engagement Software

Web 2.0 dashboard

• Minimal charts • Large headings • Not too much text

Usage • Month to date • Compared to last month Pushed data • Alerts • Usage reports Context © eMeter Corporation, 2010

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Smart Thermostat

Automated cycling during critical peak events • 2 pm-6 pm summer

• 6-8 am & 6-8 pm winter In home display

• Real-time price data, updated hourly • Monthly bill to date

• Monthly usage to date

• LED indicator during events Adoption

• One-third of participants asked for a thermostat

• One-quarter read the display

(39)

Program Overview

and

Results Preview

Patti Harper-Slaboszewicz Smart Grid Practice

Bass Consulting

(40)

Peak Demand Reduction By Price Plan

• Participants on all price plans responded to

the price signals

• Higher price differentials led to greater peak

demand reductions

• Winter results affected by small number of

events (3)

Price Plan Summer

Peak Reduction Winter Peak Reduction CPP 33% 13% CPR 13% (n/s) HP 4% (n/s)

Results are from final evaluation, covering July 2008 to October 2009.

(41)

Peak Demand Reduction By Rate Group

• Participants in all rate groups responded to the price

signals

• These results are for CPR

• Limited income customers (RAD) also responded

• Winter results affected by small number of events (3)

Rate Group Summer

Peak Reduction Winter Peak Reduction R-CPR 13% 7% AE-CPR 12% (n/s) RAD-CPR 5% (n/s) RAD-AE-CPR 30% (n/s)

(42)

Smart Thermostats

• Customers with smart thermostats had much

higher peak reductions

Rate Group No Smart

Thermostat With Smart Thermostat R-CPP 29% 49% R-CPR 11% 17% AE-CPP 22% 51% AE-CPR 6% 24%

(43)

Temperature

• Customers reduced peak demand MORE when

temperatures went up

• These results are for peak reductions hour by hour

Rate Group Peak Reduction

At 85°F At 97°F

CPP 26% 43%

CPR 8% 20%

HP 3% 3%

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Bill Savings

• Prices designed to be revenue neutral

• Average customer pays same bill if no peak load reduction

• Strategy failed for HP prices due to rapidly declining PJM prices

Analysis for CPP and CPR only • 91% of participants saved money

• Average 12-month savings was $43.83 (4%)

• Average 12-month bill increase for the other 9% was $17.43 (2%)

-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 0 100 200 300 400 500 600 700

Percent Savings by Individual CPP or CPR Participant

0% 10% 20% 30% 40% 50% 60% 70% 80% 10%+ 5 to 10% 0 to 5% -5% to 0 -10% to -5% -10%+

Participant Savings by Range

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What motivated you to participate in the

pilot program?

73% 34% 18% 33% _32% 11%

Saving Money Reducing Power Plant Emissions Improving Reliability of Electricity Supply Exploring the Advantages of a Smarter Grid Assisting Public Policy Makers Other © eMeter Corporation, 2010

(46)

Participants Liked the Program

4 6 89% 11% Would you recommend PowerCentsDC electricity pricing to

your friends and family?

Yes No

74%

20%

6%

Satisfied Neutral Dissatisfied

Overall, were you satisfied, neutral, or dissatisfied with the

PowerCentsDC program?

93% 7%

Which price plan did you prefer?

PowerCentsDC Plan Former Pricing Plan

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Please indicate which resources you found useful in helping understand your electricity pricing during the pilot.

4 7 22% 31% 21% 5% 53% 2% 9 % 14% 46% Recruitment letter Program brochure Start-up letter Refrigerator magnet Monthly electricity usage reports Toll-free number PowerCentsDC website Smart thermostat Notifications provided by PowerCentsDC of critical

peak days/high hourly prices

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What actions, if any, did you take to reduce your electricity use during critical peak periods or during times of high energy prices?

59% 25% 60% 29% 4% 22% 44% 28%

Adjusted air conditioner Adjusted the heating system Avoided use of appliances Turned off one or more televisions Adjusted the electric water heater Turned off computers/gaming systems Turned off lights Turned off almost everything

(49)

Control Customer Survey

52% 20% 14% 14% Preferred Means of Receiving Information

With bill Mailed reports Utility website Email

0% 20% 40% 60% 80% 100% Daily usage H o u rl y usage Dai ly cos t Compa ri son s W ee kl y e ma ils Energy al er ts Us age b y app lianc e 73% 56% 76% 73% 75% _71% 81%

Interest in Specific Data

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• Consistent with other pilot programs, PowerCentsDC showed that consumers reduced summer peak demand in response to dynamic prices, energy information, and automated

control,

• CPP prices led to the greatest peak demand reductions, • CPR prices were most popular,

• Limited income customers signed up at higher rates than

others, reduced peak load less than others, and saved money on the program,

• Summer peak reductions were greater than winter, implying more discretionary load,

• Automated response via smart thermostats increased the reduction, and

• The vast majority of participants saved money, even with revenue neutral prices.

Conclusions

(51)

Labor Perspective

On PowerCentsDC

Jim Hunter

Director - Utilities IBEW International

(52)

Lessons Learned

and

The Path Forward

Karen Parham

Steve Sunderhauf Pepco Holdings, Inc.

(53)

PCDC Lessons Learned

• Multiple stakeholder process for dynamic pricing pilot works

– Early engagement of all stakeholders is beneficial

– Forum for buy-in/education of stakeholders

– Complexity of implementation requirements

– Messaging from multiple parties adds credibility

– Helps validate results to all parties

(54)

PCDC Lessons Learned (cont.)

• Customer engagement and changing behavior

– Customers preferred the dynamic rates over the Standard Offer rates by 9 to 1

– More than half of the participants found the Electric Usage Report helpful

– Residential customers use multiple channels for information

– Rate simplicity is key to customer behavioral change – All residential customer types reduced electricity use

(55)

PCDC Lessons Learned (cont.)

• Implementation Issues

– Partial deployment of AMI meters less advantageous than full rollout

– Rate simplicity is important

– New processes needed for operations – Billing system testing essential

– Utilities need adequate time and resources to plan, implement and test -- even changes

perceived as simple (bill system, bill print, meter data management system and web portal)

(56)

PHI Path Forward

• Comprehensive Smart Grid approach (supported

through ARRA Funds)

• PHI AMI deployments

• Energy efficiency and conservation

• Demand response initiatives

• Renewable generators

• Accommodation of new end-uses, such as Plug-in

Electric Vehicles (PEVs)

• Ongoing stakeholder engagement

(57)

Path Forward (cont.)

• Dynamic pricing proposal

– Applies to utility Standard Offer Service for residential and non-residential customers – Critical Peak Rebates on default basis

• Based on PJM capacity and energy markets – Critical Peak Pricing on voluntary opt-in basis

• Based on PJM capacity and energy markets

– Option of non-dynamic pricing to Standard Offer Service rates

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Dynamic Pricing Rate Design

Critical Peak Price

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 0 2 4 6 8 10 12 14 16 18 20 22 24 Hour of Day $/ kW h CPP

Existing All-in Rate

Critical Peak Rebate

-1.40 -1.20 -1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0 2 4 6 8 10 12 14 16 18 20 22 24 Hour of Day $/ kW h CPR

(59)

District of Columbia Dynamic Pricing

Peak Demand Reduction Impacts

0 1 47 64 73 74 75 75 76 77 77 78 78 73 73 0 10 20 30 40 50 60 70 80 90 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Year Peak R ed u cti o n (M W )

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What Customers Want

 Help saving money… more than suggestions –

tools… personal solutions

 Demystify why bills (usage) fluctuate…

understanding things

 See energy used mid-month, bill forecasts

 More accurate/timely information pushed to them

during outages

 Programs for energy-efficiency: rebates,

buy-downs, promotions

 Education on being “environmentally friendly”

(61)

The Solution

 Evidence that their actions result in positive change

(usage, bill, environmental, standing among peers)

 Eliminate estimated bills

 New technology

 AMI/smart thermostats

 Internet data presentment

 New communications

 Utility energy advisors and specialists to educate and

advise customers

Bottom line: Customers want a conversation, not a commercial.

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