Author Archives: Jamie Fine

Timing is Everything: How California is Getting Electricity Pricing Right and Bringing Clean Power to the People

oilseed-rape-450155_1280Anybody managing a household budget knows it pays to plan ahead. With advanced thinking we can buy favorite items with coupons, when they’re on sale, in bulk, or at the cheapest store in the area. Similarly, we know that buying under duress, or in the touristy spot, will likely mean higher prices. Using the same smart shopper skills, new changes to the way utilities charge for electricity are going to give Californians another way to save money on energy bills.

In the current system, most California households’ electricity prices don’t change throughout the day. There is no option for lower prices when system demands are lower and electricity is cheap in wholesale markets. But that’s about to change, thanks to a recent 5-0 decision by the California Public Utilities Commission (CPUC).

Starting January 1, 2019, after a period of study, public outreach, and education, California’s large investor-owned utilities (Pacific Gas and Electric, San Diego Gas and Electric, Southern California Edison) will switch households to time-of-use (TOU) electricity pricing. Read More »

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Residential Electricity Pricing in California: We Need an Overhaul, not a Tune-Up

power-poles-503935_1280Here at Environmental Defense Fund (EDF), we love win-win solutions. This is why we’re big fans of time-of-use (TOU) electricity pricing (a type of time variant electricity pricing). As I’ve written before, TOU pricing better reflects the true cost of electricity, which fluctuates throughout the day. What’s more, it brings with it significant benefits for the environment, electric reliability, and people’s wallets. By empowering customers to better control their energy bills and reduce our reliance on fossil fuels, everyone wins with TOU pricing.

Thankfully, the California Public Utilities Commission (CPUC) included TOU pricing as one of the key elements in their plan to reform residential electricity rates. But how and what Californians pay for electricity – the best way to structure rates – is currently up for debate at the CPUC.

The CPUC issued its proposed decision on restructuring California’s residential rates and moving customers to TOU rates in the new structure, which EDF strongly supports as an evolutionary leap forward. Subsequently, Commissioner Mike Florio issued an alternate proposed decision that nudges the current tiered rate system forward with a time-variation “adder.” Unfortunately, Florio’s alternate proposal amounts to more of a tune-up than the substantial overhaul required to prepare for a future grid that runs on carbon-free renewables, like wind and solar, and also powers our cars, trucks, trains, and boats. Read More »

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Electricity Pricing: The Times, they Might be A-Changing

Electricity pylonsLast week, the California Public Utilities Commission (CPUC) issued a proposed decision on residential rate reform. Residential rate reform – how and what Californians pay for electricity – is a thorny subject, and the Commission’s proposed decision is being met with a range of reactions.

We at Environmental Defense Fund (EDF) want to highlight a bright spot in the 300-page document that we’re thrilled about: the attention paid to time-of-use electricity pricing (a type of time-variant pricing). Buried in this long legal document, we see EDF’s fingerprints in the Commission’s call for California investor-owned utilities to ramp up their use of this innovative yet well-proven pricing tool starting with pilots in 2016 and going to scale in 2019.

How TOU Works

If you’ve been following EDF’s work in this area, then you know we’ve been involved in this process for many years and have probably gathered that we’re big fans of time-of-use pricing (TOU) because it better reflects the true cost of electricity, which fluctuates throughout the day. This type of pricing also empowers customers to better control their own energy bills and reduce our reliance on fossil fuels.

TOU pricing works by breaking up the day into two or three large intervals and charges a different price for each. Rates can be divided into off-peak prices (generally during the middle of the night to early morning), semi-peak prices (daytime and evening), and peak prices (occurring during periods of highest demand, usually afternoon to early evening). These rates remain fixed day-to-day over the season.

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Nest’s Promising Results for Reducing Peak Electricity Demand

Back in January when Google announced it would spend $3.2 billion to purchase Nest, EDF knew this was a company to watch. The results of three new reports, released today, confirm that controllable thermostats like the Nest Learning Thermostat are both customer-friendly and useful for energy system planners. Moreover, the reports signal that smart devices, such as those Nest manufactures, have potential for generating marked savings for utility customers.

The reports analyze 2012-2013 energy use data gathered from four major utilities across the U.S. that offer Nest energy services programs: Austin Energy, Reliant Energy, Green Mountain Energy, and Southern California Edison.

The first report evaluates the results of Rush Hour Rewards, a demand response service that changes the temperature of the homes of Nest users during energy “rush hours”, or times when demand on the grid is highest. The second examines Seasonal Savings, a program that runs for three weeks and slowly modifies the temperature according to the customer’s behavior (which this smart thermostat is able to ‘learn’ via its built-in motion sensor and understanding of its owner’s temperature preferences). Both operate during times of heavy usage, namely winter and summer. The third report analyzes home energy data of Nest customers more broadly, comparing energy use before and after the installation of a Nest Thermostat. Read More »

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California on Course to Give Power to the People

Jamie Fine PhotoIn a report issued by the Energy Division at the California Public Utilities Commission (CPUC), experts demonstrated their commitment to the transition toward greener electricity rates in the Golden State. This is good news for two reasons: It will give customers more control of their utility bills and it keeps the state on course to cut pollution.

Today, most Californians are frozen by energy bills that are hard to understand and even more difficult to keep under control.  Fortunately, recommendations from the CPUC released Monday will put the power in the hands of customers by transitioning to rates that vary with the time of energy use.

These “time-variant rates” (TVR) can cut pollution by giving customers tools to directly influence how much money is spent on the least-efficient, most-expensive, and most-polluting power plants.   Critically, it’s also a way to avoid ever-growing, system-wide peak demand that leads to the building of additional power plants, known as “peaker plants” as they are specifically designed to serve customers at times of peak demand.

Because peak power plants run so few hours a day and are so inefficient, EDF estimates that if half of consumers participate in time-variant rates, California would save nearly $500 million annually.

The savings – from avoiding costly enhancements to grid infrastructure – will mean lower bills for customers and cleaner air for all.  The CPUC report affirms EDF’s analysis that total system costs will be reduced with wide-spread participation in time-variant rates, estimating that peak demand – and the associated costs of peaker plants – would be reduced by 12%.

As required by law, the rate reform proposal sets expectations that adequate protections be put in place for vulnerable customers.  The law also requires that people will always be able to choose their rate structure, but most will find that participating in time-variant rates will lower their bills with little or no effort to change their daily patterns.

The next step is for the CPUC and utilities to implement these recommendations and to put customers on the path to more cost- and environmentally-friendly rates.  With robust plans for education, outreach and enabling technologies (like programmable thermostats) to help customers reap the benefits of greener electricity prices,  time-variant rates can become another shining example of California’s commitment to innovation, the environment, and its people.

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How's Your Electric Bill Treating You? Time To Give It Some Thought

When was the last time you really gave a lot of thought to your electric bill?

If your answer is “not very often”, then you’re not alone. In fact, the typical household thinks about their electric bill only six minutes a year.

The California Public Utilities Commission (CPUC) now has the opportunity give people another way to control household energy bills by creating a system where changing the time you use electricity can save money. This won’t mean you’ll need to invest more time thinking about energy use, but you’d be well-served to think about the timing of it.

Last week, the CPUC held a public workshop inviting stakeholders — PG&E, SCE and, SDG&E, along with consumer, industry, and environmental groups — to present and discuss their proposals for revising the system of charges for residential electricity use. I had the pleasure of presenting EDF’s proposal for a time-of-use (TOU) pricing system: For customers looking for another option for saving money on their monthly bill, EDF sees TOU as the best pricing policy for both people and the environment; customers uncomfortable with this option would be able to “opt out” and choose another pricing structure.

Currently, the standard “tiered” rate charges customers higher prices for higher electricity usage. The approach is intended to send the message: “The more you use, the more you pay.”

Yet, current rates hide the true cost of electricity service at certain times of the day – and most customers don’t know where their usage falls until they actually see the bill at the end of the month. Ultimately, this lack of information prevents customers from making informed decisions about their energy use, limits their options for keeping bills within budget, and makes the overall energy system in California dirtier and more expensive.

As detailed in our proposal, EDF has found that updating the current pricing policy to be based on the timing of actual energy use will empower consumers to save money, dramatically lower overall system costs, facilitate more efficient usage of electricity generation assets, lower peak energy demand, provide more accurate and effective energy conservation incentives, and more equitably share energy system costs amongst customers. Here is a short list of what TOU can do for you, and California:

  • Dramatically Lower System Costs.  Using the utilities’ own data on the costs of serving electricity to customers, EDF estimates that if half of residential customers adopt the optional TOU rates available already , we’d reduce the cost of service by around $500 million each year.  If translated directly into savings for residential electricity customers, electricity rates could be reduced significantly: a roughly 15% rate decrease would be enjoyed by all customers. How can this be so?  Simply put, it is most expensive to provide customers with electricity at times when demand for electricity is highest.  If customers paid for energy based on actual costs of electricity service, they would see higher prices at peak times and thus be motivated to shift energy use to cheaper times of the day.  This shifting is better for overall system costs, and better for your wallet.
  • Avoid Adverse Environmental Impacts. TOU will: (1) reduce the need for “peaker” power plants that tend to be fossil-fueled, expensive to operate and among the most polluting resources on the system, (2) reduce the environmental impacts and costs of siting, operating and building power plants and transmission lines, and (3) help to integrate increasing quantities clean, renewable resources.
  • Attract Clean Energy Investments for Residential Consumers. TOU will spur innovation in the electricity marketplace, promoting the development of new services and technologies that enable utilities and customers to better manage electricity production and use through distributed, resilient, clean, and low-cost energy services and products. While the average customer may not think much about how and when they use electricity, service and technology companies live and breathe it. TOU rates provide new value propositions that clean energy innovators will deliver to our doors.
  • Reward you for your choices. A recent survey of nearly 5,000 customers by Pacific Gas and Electric and Southern California Edison found that 75 percent have tried shifting their energy use already – even though they receive no financial rewards to do so.

EDF’s proposal is a win-win for people and the environment, and takes us along the path to a cleaner, cheaper, and more resilient energy system. I urge the CPUC to conclude the same with a decision this Fall that will set the direction of California electricity pricing and prompt utilities to provide the robust consumer education and enablement with set-it-forget-it technologies.

While the concept may be complex, TOU will be better for you, for the environment, and the clean energy marketplace.

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    How California can leverage market-based environmental policies to revitalize its economy, protect its quality of life and retain a leading edge in global innovation.

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