Retail Rate Options for Small Customers

The California Statewide Pricing Pilot Why? What? The Future?

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Two Objectives

Summarize the most significant results from the California Statewide Pricing Pilot.

Identify how California is interpreting these results and what they mean for regulatory policy and demand response.

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Why ?

Why was there virtually no reduction in electricity peak demand from the customer side of the market when wholesale prices increased by a factor of five in less than a week in the summer of 2000? * How do we solve outage management practices that exempt 50% of the utility customers?

How do you provide customers with the capability to better manage their electric bills and tailor reliability to their individual needs?
What can we do to turn demand response into a viable resource?

* CEC Action Plan, October 11, 2002

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The Problems
DR programs can be best characterized as patches to compensate for poor or ineffective rate design.

Price

Without basic price information customers do not have the capability to make rational investment or operating decisions. Customers dont understand their electric rates. Electrical system problems require that technologies and procedures be in place and instantly available they werent.

Rates

Programs

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Statewide Pricing Pilot Results

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Critical Design Features

1. 2. 3. 4.

Approximately 2,500 participating customers. CPUC, CEC and CPA cooperative regulatory proceeding. Complex experimental design statistically representative. SCE, PG&E and SDG&E cooperative joint-venture pilot. Revenue neutral rate designs. Rate treatments: (1) TOU, (2) CPP-F, (3) CPP-V. Technology and information treatments.

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SPP Conclusions

System Impacts

Residential CPP rates can, within five years of deployment reduce Californias peak load by 1,500 to over 3,000 mW. Dynamic rates encourage greater conservation and peak demand impacts than conventional inverted tier or time-of-use rates. Residential and small to medium commercial and industrial customers understand and overwhelmingly prefer dynamic rates to existing inverted tier rates.

Conservation and Peak Load Impacts

Customer Acceptance

Source: CEC staff conclusions based on review of collective SPP reports.

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Residential Load Impacts (Weather)

Percent Change In Peak Period Energy Use (CPP-F)
5
1.0

% Change In kWh

0 -5 -10 -15 -20

-8.4 -9.6

-11.0 -13.4 -16.0 -17.1 -16.0

-12.5 -12.0

Climate Zone

Zone 1
Coastal

Zone 2
Inland

Zone 3
Inland Hot

Zone 4
Desert Hottest

Statewide Average

CRA Econometric Model

CEC Engineering Method

Source: Statewide Pricing Pilot, Summer 2003 Impact Analysis, Charles Rivers Associates, August 9, 2004, Table 5-4

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Residential Load Impacts (Demographics)

Percent Reduction in Peak Period Usage (CPP-F)
20 18 16 17.2% 15.1% 13.5% 12.1% 200% Average Use 12 10 8 6 9.79% > $100,000 Single Family 50% Average Use 9.8% 12.8% 12.5% 19.2%

Percent Reduction

14

12.3%

12.1%

YES

< $40,000

YES

Multi-family

NO

NO

4
2 0

High vs. Low User

Income

Single vs. Multi-Family

Central AC Ownership

Pool Ownership

State-wide Average

Source: Statewide Pricing Pilot, Summer 2003 Impact Analysis, CRA, August 9, 2004, Table 5-9, p.90

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Residential Load Impacts (Technology)

Critical Peak Impacts By Rate Treatment
Average Critical Peak Day
50% Peak Load Reduction 34.5% Critical Peak Variable With Automated Controls

Hottest Critical Peak Day *

47.4%

40%

30% Critical Peak Variable With Automated Controls

20% 12.5% 10% 4.1% TOU 0% Time of Use TOU CPP-F Critical Peak Fixed

CPP-V

CPP-V

Source: Statewide Pricing Pilot Summer 2003 Impact Analysis, Charles Rivers Associates, Table 1-3, 1-4, August 9, 2004.

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Residential Load Impacts (Incentives)

Residential Response with Automation: Participation Incentive vs. Critical Peak Rate
5.0
4.5
Control Group
Participation Incentive Critical Peak Rate

CPP Event

4.0
3.5 3.0

kW

2.5 2.0 1.5 1.0 0.5 0.0

Noon 2:30 7:30 Midnight

Hot Day, August 15, 2003, Average Peak Temperature 88.50 Levy Associates

Residential Load Impacts (Historical Results)

Average Critical Peak Day
50% Peak Load Reduction 41.0% 40% Three Tier TOU with Dispatched CPP 35.0% Three Tier TOU with Dispatched CPP 34.8% Three Tier TOU with Dispatched CPP 34.5% Two Tier TOU with Dispatched CPP

Hottest Critical Peak Day *

47.4%

30%

20%

Two Tier TOU with Dispatched CPP

10%

0%

AEP Pilot 4 1991

2 Gulf Power Pilot 3 Midwest Pilot 1992-1993 2004

California Pilot 1 2003

California Pilot 1 2003

Source: 1. Statewide Pricing Pilot Summer 2003 Impact Analysis, Charles River Associates, Table 1-3, 1-4, August 9, 2004. Hottest day impacts on page 105. 2. Private communication, residential TOU pilot study, May 2005. 3. Results of the Pilot Residential Advanced Energy Management System, Gulf Power, November 1994. 4. Levy Associates case study report, July 1994.

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Customer Bill Impacts (Actual)

Residential CPPV
Participants (%) 71.1% 5.1% $6.81

Small-Medium Commercial TOU

70.0% 4.5% $3.25

CPPF
73.7% 5.5% $3.89

CPPV
80.3% 12.2% $155.17

TOU
58.2% 9.6% $90.65

Customers With Bill Savings

Average Monthly Savings (%) Average Monthly Savings ($) Participants (%)

28.9% 4.0% $5.03

26.3% 6.2% $4.93

30.0% 3.0% $3.32

19.7%

41.8%

Customers With Bill Increases

Average Monthly Increase (%) Average Monthly Increase ($)

5.0%
$22.89

10.0%
$62.52

summer / winter 2003

Source: Statewide Pricing Pilot, Shadow Bill Results, WG3 report, June 9, 2004 .

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Customer Bill Impacts (Actual by Utility)

Change in Average Monthly Customer Bill, July 2003 thru May 2004

TOU
2

CPP-F
PG&E SDG&E
$0.18

CPP-V
PG&E SDG&E

SCE

SCE
$1.22

Average Monthly Bill Impact

-2 -$2.10

-$1.76

-$2.60
-$3.31 -4 -$4.15 Average Monthly Usage (kWh) -6 <300 -8 Source: Response of Residential Customers to Critical Peak Pricing and Time-of-Use Rates during the Summer of 2003, September 13, 2004, CEC Analysis. 300-500 500-750 > 750 -$5.86

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Residential Rate Preferences

Rates Should be Offered to All Residential Customers
Rate Group

CPP-V CPP-F

61% 62% 57%

0 10 20 30 40 50 60

27% 25% 30%

70 80

88% 87% 87%

TOU

Percent Responding
Definitely Probably

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Customer Rate Preferences (Old vs. New)

Original Inverted Tier Rate Pilot Rates

CPP-F

23%

77%

TOU
Percent that Prefer
60 40

19%

81%

20

20

40

60

80

CPP-V TOU

30%

70%

29%

71%

Source: SPP End-of-Summer Survey Report, Momentum Market Intelligence, WG3 Report, January 21, 2004, p23-24.

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Commercial

Residential

CPP-V

20%

80%

Translating the Results Regulatory Policy and Improved Operating Practices

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Demand Response A Customer Perspective

Customer Purpose of Impact DR
Total Loss of Service System Protection

The Customer Perspective

Valuing DR
Full Outage Cost

Advance Time Notice Perspective

None 0-6 hrs/yr
Reliability Responsive DR Efficiency and Conservation Price Responsive DR

Full Outage

Entire facility outage.

Voluntary Partial EndUse Curtailment

Reduced usage, increase temp settings or curtailments Load Shifting or Rescheduling

Some Comfort Impacts

Reliability and Economics

Expected Value Partial Outage Cost

End-Use Curtailment

Targeted end-use automatic curtailment brief period

Loss of End-Use

Grid or System Protection

Seconds or Less

2-10 hrs/yr

Seconds to Hours

20-40 hrs/yr

Shifting or Rescheduling

No Noticeable Impacts None

kW
Economics Hours to Days 40-100 hrs/yr

kWh

Basic Service

None

Annual

years

Customer Facility Envelope / Equipment Levy Associates

Control Systems Interface

Customer facility, end-uses and operating practices define the infrastructure that form the foundation for all DR and efficiency options. Efficiency and Demand Response are both part of the same continuum, differing only in time perspectives and valuation factors.

Regulatory Proceedings Policy Initiatives

1
2 3

Statewide implementation of advanced metering.

Critical Peak Pricing as the default tariff. Programmable controllable thermostats in the Building and Appliance Standards.

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Regulatory Proceedings Policy Initiatives

Measure Purpose

Statewide implementation of advanced metering.

Facilitate better pricing. Support customer education. Integrates efficiency and demand response on a common financial basis.

Critical Peak Pricing as the default tariff.

Demand response becomes a condition of service for all customers.

Enable / automate customer choice.

Programmable controllable thermostats in the Building and Appliance Standards.

Economic response (CPP day ahead) Reliability response (CPP day of)

Enable system protection and redefine outage management.

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