Friday, June 3, 2011
More Time Of Use Rate Information
2:37 PM | 
Posted by
Billy Ray |
Since June 1 you have likely seen or heard some of our discussion about Time Of Use (TOU) electric rates and how all EPB electric customers can help save the community a lot of money by shifting power usage on weekdays away from the hours of noon until 8:00 p.m. This information has caused us to get some questions and this post is intended to answer them.
First and foremost, the new rate is not being directly applied to anyone at their home or business in Glasgow. The new rate is applicable only to Glasgow EPB for the power we buy from TVA for our customers to use in Glasgow. Of course, if we have to pay it, that means we have to collect the money from our customers. The plea we are making is for you to cut back your afternoon usage of energy so that we can minimize rate adjustments which are necessary to cover the wholesale rates TVA charges us. Our plea for community action is to save the community money.
The idea of TOU rates did not originate with TVA. This rate concept is a long held response to real world events relative to electric power supply versus the demand for electric power. In a very real sense, we have all created the need for TOU rates. We celebrate growth. We are gleeful at the opening of a new big box store in our community even though it consumes gobs of energy. The same goes for the expansion of an industry or the construction of a new school, but we don’t feel the same about the construction of a new nuclear or coal fired generation plant in our town (or anyone else’s for that matter). Therein lies the problem. We celebrate the growth of electric demand but if anyone is paying attention to the news, all of the announcements from the electric utility industry seem to be about decisions to shut down existing generation plants and defer the construction of new ones. This is an inconvenient truth, but a truth nonetheless. We all face a future in which electric power is in shorter supply than it was in the past.
This short supply of energy might not be as ominous as it sounds. In reality, we still have plenty of supply most of the time. In the summer, the exception happens to be on weekdays, from about noon until about 8:00 p.m. During those hours TVA presently depends on its neighbors as TVA does not have adequate generation capacity to make all of the electric power we are demanding. When they go to the neighbors, the neighbors can demand whatever the market will bear for the power TVA purchases from them. As a result, the power is very expensive. This situation will only get worse in the coming years as TVA recently announced plans to shut down several more of their coal fired generation plants.
Now, different utilities have chosen different ways to pay the added expense of this “on-peak” energy. The most popular and simplest habit is to simply move these extra expenses into an account and charge for the purchased power through a monthly “fuel cost adjustment.” No matter whether you get your power from EPB, FRECC, or KU, you have been paying this fuel cost adjustment so, in effect, you have already been paying sort of a TOU rate for years – it just was not called that. The problem with this method is that it socializes the cost of electric power. It provides no incentive for folks to operate more efficiently and move load away from the on-peak time. Instead, all costs are evenly spread across all customers in the form of rate increases. This disguises the truth and penalizes all for inefficiency that could be corrected if folks were given enough information and incentives. After all, if energy is the same cost no matter what time of day it is used, why would anyone take action to move away from the hot afternoon hours with their consumption?
TVA and Glasgow EPB are moving in the direction of providing information and incentives as an opportunity for folks interested in saving money and living more efficiently. This move is not meant to be punishing nor are we forcing folks to swelter on hot summer afternoons. We do not plan to ever force anyone to move to a TOU retail rate, but we do plan on giving those who are interested in modifying their consumption patterns a reward for that change. Those who are not interested in this will likely always have the option of ignoring TOU, but they should be prepared to continue the upward spiral of energy cost. Living in a world of cheap and abundant energy as we have for the last fifty years, is simply no longer going to be an option.
So, all of this discussion about TOU rates is about Glasgow getting prepared for a future that we feel is coming just as predictably as the changing of the seasons. We have invested in a broadband network and advanced electric meters capable of exchanging information between us and your home around the clock. We believe we can work together to change the way energy is used in Glasgow and exploit the coming changes in the rates we pay. We are working to make our community sustainable in whatever fashion that the coming changes in energy supply and weather present themselves. We feel that we are ahead of other communities in preparing for the future. If any of this still leaves you confused, just let us hear from you.
First and foremost, the new rate is not being directly applied to anyone at their home or business in Glasgow. The new rate is applicable only to Glasgow EPB for the power we buy from TVA for our customers to use in Glasgow. Of course, if we have to pay it, that means we have to collect the money from our customers. The plea we are making is for you to cut back your afternoon usage of energy so that we can minimize rate adjustments which are necessary to cover the wholesale rates TVA charges us. Our plea for community action is to save the community money.
The idea of TOU rates did not originate with TVA. This rate concept is a long held response to real world events relative to electric power supply versus the demand for electric power. In a very real sense, we have all created the need for TOU rates. We celebrate growth. We are gleeful at the opening of a new big box store in our community even though it consumes gobs of energy. The same goes for the expansion of an industry or the construction of a new school, but we don’t feel the same about the construction of a new nuclear or coal fired generation plant in our town (or anyone else’s for that matter). Therein lies the problem. We celebrate the growth of electric demand but if anyone is paying attention to the news, all of the announcements from the electric utility industry seem to be about decisions to shut down existing generation plants and defer the construction of new ones. This is an inconvenient truth, but a truth nonetheless. We all face a future in which electric power is in shorter supply than it was in the past.
This short supply of energy might not be as ominous as it sounds. In reality, we still have plenty of supply most of the time. In the summer, the exception happens to be on weekdays, from about noon until about 8:00 p.m. During those hours TVA presently depends on its neighbors as TVA does not have adequate generation capacity to make all of the electric power we are demanding. When they go to the neighbors, the neighbors can demand whatever the market will bear for the power TVA purchases from them. As a result, the power is very expensive. This situation will only get worse in the coming years as TVA recently announced plans to shut down several more of their coal fired generation plants.
Now, different utilities have chosen different ways to pay the added expense of this “on-peak” energy. The most popular and simplest habit is to simply move these extra expenses into an account and charge for the purchased power through a monthly “fuel cost adjustment.” No matter whether you get your power from EPB, FRECC, or KU, you have been paying this fuel cost adjustment so, in effect, you have already been paying sort of a TOU rate for years – it just was not called that. The problem with this method is that it socializes the cost of electric power. It provides no incentive for folks to operate more efficiently and move load away from the on-peak time. Instead, all costs are evenly spread across all customers in the form of rate increases. This disguises the truth and penalizes all for inefficiency that could be corrected if folks were given enough information and incentives. After all, if energy is the same cost no matter what time of day it is used, why would anyone take action to move away from the hot afternoon hours with their consumption?
TVA and Glasgow EPB are moving in the direction of providing information and incentives as an opportunity for folks interested in saving money and living more efficiently. This move is not meant to be punishing nor are we forcing folks to swelter on hot summer afternoons. We do not plan to ever force anyone to move to a TOU retail rate, but we do plan on giving those who are interested in modifying their consumption patterns a reward for that change. Those who are not interested in this will likely always have the option of ignoring TOU, but they should be prepared to continue the upward spiral of energy cost. Living in a world of cheap and abundant energy as we have for the last fifty years, is simply no longer going to be an option.
So, all of this discussion about TOU rates is about Glasgow getting prepared for a future that we feel is coming just as predictably as the changing of the seasons. We have invested in a broadband network and advanced electric meters capable of exchanging information between us and your home around the clock. We believe we can work together to change the way energy is used in Glasgow and exploit the coming changes in the rates we pay. We are working to make our community sustainable in whatever fashion that the coming changes in energy supply and weather present themselves. We feel that we are ahead of other communities in preparing for the future. If any of this still leaves you confused, just let us hear from you.
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18 comments:
If I understand it correctly you guys have stated that TVA does not have to buy any premium market power on any weekend days, no matter how hot the day may be in the summer, nor no matter how cold the day may be in the winter, plus if a holiday falls on a weekday that day also is easily covered without the need for premium power purchased from "TVA's neighbors".
This says to me that your residential customers (ie. grandma), nor your fast food or other restaurants, nor your stores that are open 7 days a week are making such high demands on the power system. Since it's unlikely that these customers are naturally using less electricity on weekends and holidays than they do on weekdays. These customers are likely cooling or heating their homes as much or more than during the weekdays. Some are probably even more likely to be doing laundry and other chores that they have less time for during the weekdays. Meals still need to be cooked on weekends the same as weekdays.
I'm sure that EPB and KU and RECC and all the others quite accurately say that historically they have not built the metering and monitoring equipment to determine exactly which customers are making such high demands on the grid during weekdays. That this lack of information has made it difficult or impossible to accurately determine who to fairly bill for premium power usage. So they have had little choice but to divide the surcharge among "ALL" of their end use customers, even though knowing it is not a fair method.
I do think that EPB should be able to find out which customers are using an inordinate amount of extra demand on Mon-Fri compared to their demand on Sat.-Sun. Fairly isn't these that owe the fuel adjustment surcharge.
I would hope that depending on what you guys find out, that rather than this social surcharge that you levy on all your customers that you can start billing the real culprits that are involved. I know this is the reverse of the perspective you are proposing, such that, since you have more residential customers like grandma let's offer them the "carrot" incentive to conserve and try to avoid the stick method that might anger customers that already have larger bills as it is, even if they are the ones using the gobs of weekday power.
Don't get me wrong, I am all for doing some conserving of energy. Everyone should turn out lights in rooms no one is in and so on.
I think we also have to ask ourselves what would happen "IF" Glasgow as well as other TVA communities get the residential sector to do all the conserving with special appliances and special HVAC? Say the demand is lowered to the point that much less or no power has to be bought by TVA at a higher cost during those weekday hours. Will this community or other TVA communities take a sigh of relief and continue to tempt these "big box stores" as you said, or industries with the incentive of low power rates contractually locked in compared to other regions. We may tighten our belts in residences but there is a limit to that, at some point those that use gobs of weekday energy must be made to pay for it or we'd just be right back in the same situation again in a few years with little or no more ability to use residential conserving to help.
It also makes me wonder how/why TVA's neighbors have excess power themselves, during times that TVA has peaks it would be logical that neighboring power companies would also. Are they building those nuclear plants and other power generating plants that TVA is delaying or closing? What happens if the time comes that no neighbor of TVA has excess power to sell at a peak time???
Chuck,
This is an excellent post and raises some very interesting issues.
First of all, I did not mention winter because that brings on a whole new discussion of peak and off peak times that I think it better to hold off until winter to discuss them.
The main reason non-holiday weekdays are when summer peak occur is that more businesses, even in 2011, are open on weekdays than on weekends. Peaks occur on weekday afternoons mainly because we use ancient thermostat technology which causes energy peaks to track temperature peaks. All customer classes contribute to this result and we are trying to reach out to all of them to consider changing their habits.
You are correct that the metering technology is just now evolving to allow truly timely tracking of the energy we are all consuming. But you are a bit off base when you say that we are leaning toward continuing to socialize the cost of premium power purchases. The opposite is true. Most utilities are trying to continue that habit, but TOU rates are designed to break that pattern an reward those who are willing to alter consumption as an alternative to just averaging out costs to all and failing to accurately track costs to those who cause the costs.
Why do TVA's neighbors have excess power to sell them? That is a really interesting question that I can only suggest some possible answers. I do not pretend to know all that is knowable about this. But, most of TVA's neighbors are investor owned instead of publicly owned like TVA. That means that the neighbors have been making investments that they can seek return on from their respective state regulatory authorities. They have continued to build capacity because they can make a profit from it! Contrast that to TVA who has responded over the last couple of decades to the short them desire for "cheap power." The best way to get short term cheap power is to defer construction and maintenance on old facilities. We asked for it, and they did what we asked. This is an example of why the old expression "be careful what you ask for, you just might get it" is so true.
If we get folks to change their load patterns and free up some capacity will we squander that success by continuing to offer subsidized low rates for new buildings? Great question that can only be answered by a public determined to grow in a much smarter fashion than we have in the past. I hope we can all be smart enough to do that.
Can the shortfall in generating capacity of TVA during peak times, since I'm not familiar with the amounts, be adequately covered by completing their investment in Bellefonte in Alabama with one or two reactors? As you know the location had been purchased and far along in completion when the whole operation was boarded up years ago. It seems to be the most logical next step for them since they already have a substantial investment there already. If that even left TVA with excess generating capacity then TVA could themselves begin to sell that at a premium and make some of the profit similar to it's neighbors.
"NICE BLOG"
Thanks,TONY
TVA recently completed and published an Integrated Resource Plan that leans heavily on the completion of new nuclear units to replace the retiring coal fleet over the next several years. Of course that was a couple of weeks before the events in Japan. Now there are huge questions about whether the public will allow these new units to be completed. No one knows how that might play out.
At any rate, nuclear plants are not good at tracking short term on-peak demand. Nuclear plants are great for base load production. They like to run wide open twenty four hours a day. Getting folks to shape their load to match the output of units like this gets us right back to the need for TOU rates which are designed to get folks to reshape their demand to better match base load plant output.
Also, the cost of nuclear plants makes them a poor investment for the idea of making a profit with them. By far, the low cost method of providing new capacity is from using TOU rates and new technology to use less energy on-peak and maximize the investment in existing base load plants.
First off, this is a very interesting discussion, and I've enjoyed reading all of the opinions on this matter. Many questions have been raised, and plenty of questions have been answered.
I want to like the idea of a gradual transition to Time Of Use electric power rates, but it just wouldn't be attractive for local industry. Grandma might be okay with these rates, but no competitive business in the industrial sector will want to submit to the TOU system because they are the largest consumers of power, and would either choose to lose money (no one chooses that), adapt to a different power usage schedule (unlikely), or move where there is greater business incentive (likely) in response to electric rate increases during peak hours. Since the power-hungry industrial sector is the primary driver of the desired economic development, TOU rates would, in this manner of thinking, not benefit the local economy in the long-run.
This point, however, would be voided under the proposed system where consumers have the option of choosing between TOU rates and just paying a 'socialized' electric surcharge. This kind of option is applied in other areas, and it seems to work well. For example, a bowling alley might give you the option of bowling at a flat rate per lane per hour in addition to bowling per person per game. The first option would be advisable for a certain group of people, such as the people who plan on playing several games, while the second option would work best for others. Similarly, cell phone companies have different packages tailored to the needs of different consumers, and everyone chooses a plan that fits his or her needs. This could easily be applied to electric rates as well: residents who decide that they are willing to consume less energy during peak hours would sign up for TOU rate scheduling, and all others would continue with the surcharge option. From what I gather, this is the basis of the proposal, and it seems like a feasible option.
Implementing this TOU rate scheduling might encourage a slight reduction in peak power usage from the residential sector, but the plan is not sustainable. Everyone wants economic development, and in this society, that means more energy usage, so we would eventually be faced with the same problem-- too much peak demand.
The truth is that residential consumers can only feasibly reduce their power consumption by so much, and that if the peak energy demand problem is ever going to be corrected, the movement must come from upstream: The TVA, East Kentucky, etc. It has already been mentioned, however, that correcting the problem at its source will never happen. The TVA will continue to shelve construction of any generation infrastructure in order to avert short-term price hikes.
But Why?
It's unfortunate that many of the viable generation options are best suited for base load. Building new facilities just won't solve the peak usage problem. Nuclear is a great option (And people should just calm down about it. Nuclear plants should never be equated to nuclear bombs in the eyes of the public. News stations broadcasting maps with all of the nuclear facilitates in the U.S. under cross-hairs certainly isn't helping the problem. And France has been successfully powering their country for years primarily with Nuclear energy), but, as mentioned previously, these facilities generally have a static, unchanging power output. Drastically Up-sizing them and building new reactors would be financially unwise because this expensive equipment would remain unused during off-peak times. However, I feel that some expansion of our Nuclear portfolio would be helpful. For instance, look at this graph from the TVA:
(sorry, image tags aren't allowed)
http://www.tva.com/news/keytopics/pdf/price_power.pdf
Notice that there is a large window where Nuclear energy could be expanded and still remain within the base load. Surely, even a generation and transmission company that is funded by government subsidies would have the capital necessary to invest in this window.
To continue, coal is cheap, but no one wants more coal than necessary. Hydro-electric is great, but we don't really have much room to expand there, and solar and wind is just too expensive, especially in this part of the country. It sounds like doom and gloom from every generation option.
What if, though, the TVA instead invested in grid energy storage? Large-scale energy storage is not a new idea, and it can be implemented specifically to combat the peak energy use crisis. Grid energy storage is a fairly simple idea, and it can be accomplished in a number of ways. Basically, excess power generated during off-peak hours is fed to some sort of storage system, and that energy can be harnessed later during peak-hours when it is needed. If I’m correct, the TVA has already gotten their feet wet with a pumped-storage plant at Raccoon Mountain. This facility operates similar to a hydro-electric dam, but water doesn't just flow downstream and turn a turbine. water is pumped to the upper reservoir during off-peak times so that it may be released during peak hours. This facility is fine, but creating a reservoir is a very large investment.
Another, more promising method of grid energy storage is uprating a hydro-electric dam. This involves adding more generators to an existing facility and letting more water out of the reservoir during peak hours, and restricting the flow early in the day or on weekends. This is basically the same concept as pumped-storage, but is more efficient because it doesn't require pumps, and this method is still much cheaper than building a whole new facility. I don't see why it wouldn't make sense economically to invest in this method.
Another related concept is the addition of thousands of electric-vehicles to the grid. This is yet another method of grid energy storage, and it certainly goes along with the 'forward thinking' initiative that everyone is buzzing about. Theoretically, we will see a large addition of electric vehicles to the market in the next several years. The idea is that these cars will remain plugged into the grid for charging most of the day, and therefore could work as a sort of grid energy storage system. These vehicles would charge their batteries (using grid energy) during off-peak times, and if left plugged in, would actually feed some power back into the power grid during peak times. It's a very exciting possibility, and I think we should work to encourage it.
I hope that the TVA and other generation and transmission companies will look into these options. Unfortunately, most of these options fall out of the scope of a typical residential consumer, but we can at least do our part to conserve energy in moderation. Everyone can turn up the thermostat a degree or two, wash clothes in the evening or on weekends, and turn off the TV when you leave the room. We, the consumers, are the last stop on the power grid bus, and alone we just can't make much of a difference, but if each of us work to save a few extra kWh's per month, then it just might add up.
(continued from previous post. There is a character limit)
(sorry, image tags are not allowed, here's the image's address instead)
http://cambronweb.dyndns.info/b2evolution/blogs/media/blogs/blog/current%20energy.png?mtime=1307246552
Notice that there is a large window where Nuclear energy could be expanded and still remain within the base load. Surely, even a generation and transmission company that is funded by government subsidies would have the capital necessary to invest in this window.
To continue, coal is cheap, but no one wants more coal than necessary. Hydro-electric is great, but we don't really have much room to expand there, and solar and wind is just too expensive, especially in this part of the country. It sounds like doom and gloom from every generation option.
What if, though, the TVA instead invested in grid energy storage? Large-scale energy storage is not a new idea, and it can be implemented specifically to combat the peak energy use crisis. Grid energy storage is a fairly simple idea, and it can be accomplished in a number of ways. Basically, excess power generated during off-peak hours is fed to some sort of storage system, and that energy can be harnessed later during peak-hours when it is needed. If I’m correct, the TVA has already gotten their feet wet with a pumped-storage plant at Raccoon Mountain. This facility operates similar to a hydro-electric dam, but water doesn't just flow downstream and turn a turbine. water is pumped to the upper reservoir during off-peak times so that it may be released during peak hours. This facility is fine, but creating a reservoir is a very large investment.
Another, more promising method of grid energy storage is uprating a hydro-electric dam. This involves adding more generators to an existing facility and letting more water out of the reservoir during peak hours, and restricting the flow early in the day or on weekends. This is basically the same concept as pumped-storage, but is more efficient because it doesn't require pumps, and this method is still much cheaper than building a whole new facility. I don't see why it wouldn't make sense economically to invest in this method.
Another related concept is the addition of thousands of electric-vehicles to the grid. This is yet another method of grid energy storage, and it certainly goes along with the 'forward thinking' initiative that everyone is buzzing about. Theoretically, we will see a large addition of electric vehicles to the market in the next several years. The idea is that these cars will remain plugged into the grid for charging most of the day, and therefore could work as a sort of grid energy storage system. These vehicles would charge their batteries (using grid energy) during off-peak times, and if left plugged in, would actually feed some power back into the power grid during peak times. It's a very exciting possibility, and I think we should work to encourage it.
I hope that the TVA and other generation and transmission companies will look into these options. Unfortunately, most of these options fall out of the scope of a typical residential consumer, but we can at least do our part to conserve energy in moderation. Everyone can turn up the thermostat a degree or two, wash clothes in the evening or on weekends, and turn off the TV when you leave the room. We, the consumers, are the last stop on the power grid bus, and alone we just can't make much of a difference, but if each of us work to save a few extra kWh's per month, then it might just add up.
Daniel, your posts are outstanding and very well researched. You are spot on that some sort of grid storage would solve so many of our problems. TVA's Raccoon Mountain facility is an excellent example of grid storage and it is one of TVA's most valuable assets.
Of course, building massive pump storage projects like this are exceedingly capital intensive and have certain environmental impacts that might make more such projects difficult to get on-line. However, we have, for years, been promoting the idea that each and every home and business has its own little version of Raccoon Mountain in it. Just like pumped water storage, we can store warm and cool air and hot water in our homes and businesses simply by using broadband to control the appliances and thermostats in homes to affect this storage and load shifting. We call this concept infotricity and you can read a few of the posts we have made over the years about infotricity at these links: http://rbg.glasgow-ky.com/2008/03/elegant-solution-ignored.html http://rbg.glasgow-ky.com/2008/07/this-is-our-home-how-are-we-going-to.html and http://rbg.glasgow-ky.com/2008/07/this-is-our-home-how-are-we-going-to.html
The problem with getting TVA and other utilities to embrace infotricity is that they are genetically linked to building uber expensive generation plants and, so far, they just cannot accept this "infortricity plant" as being real.
The planets might be lining up though. Let's all hope so.
Looks like I messed up and put one link in twice and left this one out. This might be the best one of all for a detailed explanation of infotricity theory.
http://rbg.glasgow-ky.com/2009/03/electric-power-version-20.html
Mr. Ray,
Thank you for pointing me to those posts about 'infotricity.' They presented some very good ideas about how to turn the electricity distribution system into an active system that is continuously manipulated based on input from a variety of factors including temperature, consumer preference, and weather patterns. The idea holds great promise, and I think there are a few different options to consider as far as different ways to implement this system.
You described a system in which every power-consuming appliance in a consumer's electric service is assigned an IP address and has the ability to communicate with a remote, central server that synthesizes the communicated variables and has the ability to control the operation of that device.
This, regrettably, sounds slightly invasive. The idea that a remote server can manipulate my household appliances and make power consumption decisions without my direct consent is slightly unnerving. I understand that I could always disconnect from the server, but just think how much power the program that reads from that database would have! It could, theoretically, blackout the entire Tennessee Valley with a malfunction, although I'm sure that many steps would be taken to insure that could never happen, and I'm sure that the generation system already has to deal with this.
Nevertheless, I wholeheartedly support the idea, but I believe the first step in implementing this system might be to localize the server within each consumer's home. Each device could connect to my local household wireless network, and a computer program on my desktop could manipulate my household system in the same way that the larger alternative would. It's just a thought.
To shift gears back to the original topic, I have a few specific questions about TOU rates. I'm wondering specifically how much more expensive wholesale power from the TVA is during peak hours as opposed to off-peak hours. Basically, how much of a percent increase in peak wholesale power cost are we dealing with? And if TOU rates were applied to retail consumers, how much of that percent increase would be translated to their bill? Thirdly, are these rates, for clarification, setup to be dual-flatline rates where there is a specific off-peak rate and a specific on-peak rate, or will the price of power fluctuate as a function of demand throughout the day?
And lastly, I'm a residential consumer who is very eager to help out our community by saving energy during peak hours, but (and I'm sure other residential consumers have the same dilemma) I'm unsure as to the best way to go about accomplishing this. I like the idea of pre-cooling my house early in the day and 'coasting' during peak hours, but my thermostat is ancient. Should I go ahead and invest in some sort of programmable thermostat for my HVAC and water heater? If so, is there a particular thermostat that you would recommend?
Good work guys. I've also read intently the conversations as it has been moving along.
I noticed in Daniel's comment in refering to TOU rates and how industrial/business customers wouldn't choose to go to that sort of rate structure because logically it would mean their bill would increase. He mentions leaving it "optional" for each customer to determine which rate plan they want to have either the current basic rate plan with additional monthly "socialized" surcharge/subisidy added on or moving to the TOU rate plan where each customer pays a a different amount for the power consumed during peak hours of the week and another amount for power used during non peak hours.
That analysis misses the idea of how I understand the social surcharge works, or what will happen as residential users start making comparisons of what their monthly bill is on the current rate plan plus social surcharge vs. based on their usage data, what their bill would be with TOU rate (which will have NO social surcharge at all).
At some point each residential customer will be faced with the choice either by calling and asking EPB to give them the comparison information, or on each montly bill it can be automatically calculated and say something like.. "You could have saved $xx.xx this month based on your usage amounts and times by switching to our TOU rate plan." If their usage data reflects this savings without doing any conservation or altering usage at all then no doubt there will be one less customer on the basic rate plan.
Gradually one by one as customers switch to TOU from basic rate plan the number of customers to which the current peak social surcharge get divided among gets lower and lower. The net effect is those industries and businesses who elect not to switch will find that their monthly bills will go up anyway because that surcharge with fewer and fewer to divide it among will go up on the ones that are left.
One way or another these businesses and industries will be paying fairly for what they consume, it's just a matter of how politically correct we want to go about getting there.
The business model is more similar to movie theater business than cell phone or bowling alleys referenced. People want to go to watch a movie at the theater during prime time evening hours, the demand is high so it is more expensive. If customers will go during daytime matinee hours they can watch the same movie at a lower demand time at a cheaper cost to them. Note that rural Glasgow and other areas in our region have prime time movie ticket prices that are still much cheaper here than in other areas like New York, Atlanta, Chicago etc.
What keeps industries from leaving or coming to this area when they are paying for exactly what it costs to provide them the power they use is that similar to the theaters, is the point that TVA's rates remain cheaper than they'd get by moving to other areas where the power companies work to make a profit and thus charge even higher rates.
Daniel,
Unfortunately, due to the massive political pressure applied to TVA, the wholesale rate we just moved to on April 1 has only a small differential between on-peak and off-peak energy. The difference is less than two cents per kWh. However, since the wholesale rates applied to all TVA distributors has remained unchanged in structure for nearly twenty years, even this small change is substantial.
We are making a big deal out of it even though the actual money difference is small because we want to prove to TVA that it IS possible to change consumption patterns with rates and technology. We need to prove this so that we can encourage them to make larger differences between on-peak and off-peak in coming rate adjustments such that we can enjoy the efficiency of living off of the generation assets we have instead of them constantly building more and plowing those costs into a socialized rate environment.
We do believe it makes sense to go ahead and install a relatively inexpensive programmable thermostat, even though there is little gain immediately for the individual home since TOU retail rates are not yet in place. While many of them are on the market at just about any home improvement store, we are fond of the Honeywell TH6000 Series as a nice, inexpensive and highly reliable unit that is easy to program. I got mine installed by HVAC Services right here in town.
As I said, there is little financial gain for an individual right now, but every kWh deferred in on-peak time and moved to off-peak saves the community money. We are using this programming pattern:
Wake 10a.m. - 72 degrees
Leave noon - 78 degrees
Return 8 p.m. - 75 degrees
Sleep 11 p.m. - 74 degrees
Chuck,
We are already deploying IP based electric meters and will continue doing so as we can raise the capital. When these meters are installed on a home that uses the internet, we will start showing them and emailing them information about their consumption and cost on the old fixed rate and show them what their bill would be on the TOU rate. In this fashion anyone can "test drive" a new TOU rate to see if they can save money that way.
We are also doing Alpha test work with a firm that drags all of this information into a Facebook environment where individuals can see how their homes off-peak efficiency compares to their neighbors. The game will allow folks to amass points and then we will monetize those points with things like premium channels, faster internet service, VOD movies, etc. We know that there must be a formula whereby folks are willing to be flexible on the temperature of their homes in return for some reward...we just have to discover that relationship.
You are correct that, over time, and as TVA's portfolio of generation assets continues to dwindle, or get replaced at much higher costs, the plain vanilla "use all you want whenever you want" rates will get higher and higher. As that happens, we want to be ready to offer folks the TOU alternative.
Chuck,
Thanks for that insight into the reasoning behind the dual rate plan system. The idea that this dual rate system would gradually move more people toward a TOU rate plan, as the surcharge for the socialized peak power option increases, seems to be a logically sound idea, and was the original reasoning behind the dual rate system. Also, the movie theater analogy is a very good one; I wish I had thought of it!
Billy Ray,
I will certainly look at purchasing a programmable thermostat in the next few days, although I know it will save my family relatively little in the short run. I live in a house that is well over 100 years old, and as you can imagine, it is very difficult to cool the house because it is very poorly sealed. However, I'm sure the TOU rates would give me the incentive to finally fix the cracks and make the house more energy efficient, something that we all should do. Then, maybe my programmable thermostat would start being useful.
You mentioned something about already beginning the process of deploying electric meters with IP-based communication. Do you have a conversion schedule for these kinds of upgrades, and if so, is it accessible to the public? Also, what is the ratio of the different type of electric meters used in the EBP's service area? I was just wondering about this the other day because I still have an analog, sealed-glass type electric meter, and I'm interested to know how many other EPB consumers have this same meter type.
Has Glasgow's electrical load dropped since the start of the economic downturn? I know that some factories had either closed or downsized. Did that make a difference in the electrical load?
We have been doing research and development of IP based metering for about a decade. Some of what we have deployed works well, some of them do not.
Just a few months ago the EPB approved a four year plan to deploy a version of the IP based meters which we are now convinced is reliable and relatively future proof. That project is just getting started and will make it to all EPB customers within four years.
Today we have about ten percent of our meters converted to IP metering, but many of those will soon be replaced with the new version. As we receive adequate supply, any customer that wants to be converted sooner rather than later so that they can test drive the TOU rate, should let us know so that we can get your conversion planned.
Yes, Glasgow's electric demand has dropped precipitously over the last couple of years of the economic downturn. Unfortunately, that reduction has been uniform and thus the ratio of on-peak to off-peak consumption has not improved with that overall reduction of energy consumed. So, we have fewer kWh sales to pay for our fixed costs and then TVA comes along and modifies the wholesale rate to create the TOU environment. This puts us in economic peril as well.
i have read your information and i understand what you are saying. what i don't understand is ? i have not used my dryer for two months my air as been on eighty degree i cook very litter but yet i have the highest bill i have ever had in my life. i have done every thing i know to kept my bill down.and yet it is still going up. an when you are sick like me an on a fix income, you just don't know hard it make it on pople like me .it means one more thing you have to do without.