This commentary originally appeared on EDF's California Dream 2.0 Blog
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.