Home Area Network (HAN)/Home Energy Management Systems (HEMS)

In a recent order, the Massachusetts Department of Public Utilities (“Department” or “DPU”) stated that time varying rates are an essential component of grid modernization. As a result, the design of basic service must change to incorporate time of use (“TOU”) rates for all customers, including residential customers. The Department noted that in 2013, the average wholesale market price of electricity over the course of the year was $56 per megawatt-hour (“MWh”), but the peak wholesale price in the summer reached nearly $870 per MWh and in winter nearly $1,300 per MWh. However, despite the volatility in the wholesale market, basic service customers’ rates did not reflect the time varying nature of electricity supply costs. The Department sees this as a problem. (Warning: DPU should take a short flight down to PJM land where customers’ exposure to last winter’s price spikes is still being discussed.) Nevertheless, DPU is concerned because under the current basic service structure in Massachusetts, rates do not reflect the time varying nature of electricity supply costs. Additionally, customers who are able to shift more of their electric usage to off-peak/lower wholesale cost hours subsidize customers who use more electricity during hours with higher wholesale electricity prices.

The Time Varying Rates Order describes a policy framework that will require electric distribution companies to offer two basic service TOU options:

  1. A default product with time of use pricing that includes a critical peak pricing (“CPP”) component. Under this TOU pricing structure, the retail electricity price will be higher during certain hours of the week when customers typically use more electricity and wholesale energy prices rise (e.g., the “on-peak” hours of noon to 8:00 p.m. each weekday) than during the remaining hours of the week when electricity usage and wholesale prices are typically lower (i.e., the “off-peak” hours).
  2. A flat rate with a peak time rebate (“PTR”) option. With a PTR, customers will receive a rebate if they lower their electricity use relative to a pre-established baseline during times when wholesale hourly energy prices are highest. Thus, under PTR, customers will have an incentive to lower their electricity usage when it is most critical to do so, but even those who ignore the incentive will be insulated against higher peak prices because they will pay one price for all electricity consumption.

The Department anticipates that the on-peak rate will be higher and the off-peak rate lower than a flat-rate product. Thus, customers who respond to price signals by reducing on-peak energy consumption will pay less than they would under a flat rate.

Written comments regarding this policy framework may not exceed 25 pages and must be submitted no later than the close of business (5:00 p.m.) on July 3, 2014.

 

OG&E filed an application on December 17,2010 with the Arkansas Public Service Commission seeking approval to recover costs for the installation of smart meters and related smart grid technology. OG&E is hoping that when armed knowledge and information about the real time price of energy, customers will make energy-use decisions that shift demand away from hours when electricity costs are at their highest, to lower-cost times of day, saving money on their monthly bills and helping OG&E delay the need for the costly addition of more generating capacity. This would be a win/win as OG&E would reach its Goal 2020. “This technology and the efficiencies it brings are integral components in our goal to reach the year 2020 without adding fossil-fueled electric generation,” said Howard Motley, vice president of regulatory affairs.

If the Commission approves the plan filed today, OG&E expects to begin installation of approximately 70,000 smart meters and associated smart technology in its western Arkansas service area in the second half of 2011. Installation of the technology would increase the average residential customer’s electric bill by $1.64 per month. The filing also identifies the portion of a $130 million federal stimulus grant that OG&E will utilize to help offset costs to Arkansas customers. 

The smart technology OG&E is proposing uses the networking capabilities of the new meters and a secure wireless network to allow the company to read meters remotely, as well as start and stop service. Other smart grid devices will add greater automation to the company’s electricity distribution system, helping to reduce the frequency and duration of outages. The full roll out of smart technology, which includes new meters, in-home technology, a wide area network (WAN) and distribution system automation, is expected to be completed around 2017.

It does not take long to understand that everyone: utility, customers and society benefit from a smarter grid. Let’s examine one feature of  the smart meter – the ability to do remote disconnect/reconnect will save both OG&E and its customers millions of dollars. The company should see a decline in collection related write-offs in addition to the efficiencies from being able to turn service on or off at the flip of a switch.  This will yield less fleet, less gas, less emissions and a greener environment and greener wallets.