Latest Developments in Dynamic Pricing and Advanced Metering Adoption Restructuring Roundtable

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Latest Developments in Dynamic Pricing and
Advanced Metering AdoptionRestructuring
Roundtable 99February 9, 2007

• Stephen S. George, Ph.D.
• Principal Consultant
• Freeman, Sullivan Co.

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There is so much going on, its hard to know
where to start

• Pricing experiments continue to show that
  customers can and will respond to dynamic prices
• Combining enabling technology with price signals
  significantly increases demand response
• Getting customers to try time-varying rates
  remains a challenge
• Information feedback is showing promise
• Unfortunately, its still true that if you ask
  two people what AMI is, youll get three answers
• Open standards (at least half open) are the
  newest in thing
• EPAct continues to generate a lot of heat for DR
  and AMI (but how much light remains to be seen)
• PPL takes the plunge into the world of MDM
• California continues to build DR infrastructure

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As the results of each new pricing pilot become
available, a common story is developing
Price Ratio 4.11 41
4.61
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More experimental results are on the way?

• Analysis from PSEGs pricing pilot should be
  available within the next few weeks
• Xcel Energys pricing pilot is complete and a
  regulatory filing is due in April
• The regulatory log-jam that stalled the Pepco
  (SMPPI) pricing pilot finally broke earlier this
  month
• Will examine CPP and Peak Time Rebates
  side-by-side
• Results are a year away
• Similar results are being seen across a wide
  spectrum of pricing concepts
• CPP, RTP and PTR (rebates)

There is 30 years of research indicating that
mass-market customers can and will respond to
time-varying price signalsis it time to stop
doing experiments and just get on with it?
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Combining price signals with control technology
significantly increases demand response

• Californias Statewide Pricing Pilot showed
• That peak-period impacts on critical days roughly
  doubled for residential customers when PCTs were
  used
• For CI customers with demands less than 20 kW,
  there was no reduction on critical days without
  PCTs but a 13 reduction with PCTs
• For CI customers with demands between 20 and 200
  kW, there was a 5 reduction without PCTs and a
  10 reduction with PCTs
• In the Ameren pilot, reductions doubled with PCTs
  for residential consumers
• The Gulf Power program is the poster child for
  enabling technology combined with dynamic pricing
• But Gulf Powers population characteristics
  differ significantly from consumers in most other
  parts of the country

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The real challenge is getting customers to try
time-varying prices

• Market research and experience indicate that
  customers are reluctant to sign up for CPP
  tariffs due to risk aversion
• Customers like time-varying rates once they try
  them, but when considering whether or not to sign
  up, customers focus more on down-side risk than
  upside potential
• There is no political will to place customers on
  default dynamic rates
• Massachusetts examination of this is encouraging
  and CA keeps talking about it
• SDGEs proposal for a carrot-only peak time
  rebate offering addresses the downside risk and
  may prove popular
• UC Energy Institute has proposed a new Incentive
  Preserving Rebate tariff that addresses
  psychological barriers to acceptance
• PGEs AMI application proposed an aggressive
  marketing campaign to attract 30 of its target
  population for CPP rates
• CAs aggressive approach with enabling technology
  could help

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Information feedback is gaining attention

• Hydro Ones experiment was the first
  statistically rigorous study of the impact of
  real-time information feedback on energy use
• More about energy conservation than demand
  response
• Roughly 400 customers monitored over 2.5 years
• Provided with usage, dollar and CO2 emissions per
  hour, total to date and predicted
• 6.5 average reduction across all households
• Reductions were lowest for households with
  electric space heating (1.2) and highest for
  households with electric water heating but no
  electric space heating (16.7)
• Salt River Project has conducted a similar pilot

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What is advanced metering infrastructure?

• Advanced metering is a metering system that
  records customer consumption and possibly other
  parameters hourly or more frequently and that
  provides for daily or more frequent transmittal
  of measurements over a communication network to a
  central collection point.
• (FERC, Assessment of Demand Response Advanced
  Metering, August 2006)
• Most people would agree that this definition
  identifies the minimum functionality of
  AMIinterval data daily
• Others (DRAM, CPUC) include much greater
  functionality, including two-way communication,
  remote connect/disconnect, information provision
  to consumers, and interface with end-use control
  devices

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What advanced metering is not!

• Mobile AMR ? AMI
• And a movement to legislate accelerated
  depreciation for AMI that includes mobile AMR
  for monthly collection of TOU data will hinder
  demand response penetration
• Indeed, any investment in mobile AMR will hinder
  DR penetration for years to come
• Fixed-network AMR ? AMI
• While defining AMI correctly, FERCs survey
  counted every fixed-network AMR system as AMI
• Substantial investments and/or additional
  outsourcing payments would be required to obtain
  interval data on a large number of customers from
  many legacy fixed network AMR systems
• PPLs system is the ONLY one that currently
  gathers hourly data on all customers (once
  installed, PGEs system will do so, as will
  Edisons and SDGEs if approved)

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Open standards are all the buzz

• OpenAMI, Grid Wise, Intelligrid, SCEs functional
  specification, etc.
• There are many organizations touting the benefits
  of open communication protocols between an AMI
  system and end-use devices
• Eventually, this could allow consumers to
  purchase compatible control and display devices
  at Home Depot for example and foster competition
  among suppliers
• SCE is requiring AMI suppliers to have Zigbee
  compatible meter communication capability
• Itron and DCSI (and perhaps others) are going to
  market with offerings that meet this requirement

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EPAct is generating a lot of heat (but how much
light?)
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PPL takes the next step

• PPL is the only utility that currently collects
  hourly data on all of its customers
• But until recently, that data was being discarded
• PPLs AMI system was estimated to be essentially
  breakeven based solely on operational savingsDR
  was not directly considered
• PPL recently completed initial installation of
  Nexus MDM
• Energy Visionenterprise-facing software that
  manages usage data in order to improve business
  processes such as billing, forecasting,
  settlement, revenue protection and distribution
  planning
• Energy Prisma customer-facing application that
  provides customers with more useful information
  on bills or through web-based interfaces.
• PPL has high hopes that the self-service aspects
  of a web portal will lower costs, improve
  customer service and foster better consumer
  decisions

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Web portals can provide valuable information
Links to additional content and tools
Peak energy is expensive- Use it Wisely
Save money by using less peak energy, especially
on Critical Peak days
How do I spend my energy dollars during Peak
Periods?
Take action, especially on Critical Peak days
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A load shift calculator can help customers decide
what actions to take to shift load
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CA is developing the most DR friendly
infrastructure in North America

• The CPUC approved PGEs AMI application in June
  2006
• PVRR of 2.2b to replace 5 million electric
  meters (PLC by DCSI) and 4 million gas meters
  (RF by Hexagram)
• Deployment will be complete by the end of 2010
• SDGEs AMI application is being reviewed and a
  decision is expected this quarter
• Settlement discussions currently underway with
  interveners
• SCEs RFP is currently on the street
• The CEC has proposed to modify building standards
  so that all new construction and all HVAC
  retrofits will have PCTs
• PCTs will have one-way radio or paging capability
  (with no override) to be used for reliability and
  a port through which Zigbee or other protocols
  can be incorporated for use by utilities for
  economic dispatch

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At PGE, operational savings covered 90 of
costs demand response easily covered the gap
460
Demand Response
2500
2,227
200
2.026
Gap
2000
1500
Millions of Dollars
Operational Benefits (PVRR)
Costs (PVRR)
1000
500
0
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At SDGE, operational savings only covered 60 of
costs. An aggressive DR strategy covered the gap
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Key Conclusions

• Customers can and will respond to time-varying
  prices
• Responsiveness seems to be similar across
  alternative rate concepts (CPP, RTP, PTR) and
  across utilities (after adjusting for population
  characteristics)
• Getting customers to try time-varying rates can
  be difficult
• But once they do, they often embrace these
  options
• Risk aversion is a significant barrier that
  carrot-only approaches and enabling technology
  can help address
• Enabling technology such as programmable
  communicating thermostats can significantly
  increase demand response
• And may be essential for small CI customers

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Key conclusions (continued)

• AMI functionality continues to evolve rapidly
• Open standards for beyond-the meter control and
  information technology will help drive down costs
  and increase penetration
• MDM functionality is also evolving
• In-home displays, web portals and enhanced bill
  presentment can improve customer decisions
• Demand response is rapidly becoming the hot
  topic at both the state and federal level and a
  key driver of interest in AMI
• The combination of pricing, enabling technology
  and enhanced information, built on an AMI
  platform, can produce substantial demand response

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For more information, contact

• Dr. Stephen S. George
• Principal Consultant
• Freeman, Sullivan Co.
• 415 777-0707
• StephenGeorge_at_FSCGroup.com