 Ameren Real Time Pricing: Access to Lower Energy Prices - By Patti Harper-Slaboszewicz Daily IssueAlert 5/16/2007 Free As utilities across North America embrace time-based rate plans to offer customers options that can provide an alternative to increasing higher averaged prices for electricity, a new market has opened up for outside firms to provide assistance to utilities in marketing and supporting these programs. In 2006 the Illinois General assembly passed legislation that mandated large utilities to offer residential real-time pricing via programs run by an independent program administer. In late 2006, the Ameren Illinois Utilities (AmerenCIPS, Ameren IP and AmerenCILCO) issued an RFP to provide assistance for marketing and providing the customer interface for a large real-time pricing program for residential customers for all three Ameren service territories in Illinois. The goal for the Ameren Power real-time pricing program is to recruit at least 20,000 customers over the four year program period. Along with a similar program in the ComEd service territory, Illinois has the potential to become the home of the largest residential time-based rate programs outside of the time-of-use programs in Arizona sponsored by Arizona Public Service and the Salt River Project. The Community Energy Cooperative (CEC) was selected by Ameren to be the program administrator for what they are branding as the Power Smart Pricing program. The CEC is a non-profit organization helping consumers and communities obtain the information and services they need to control energy costs. The Cooperative was founded in January 2000 by the Center for Neighborhood Technology. Because Illinois is a competitive energy state, it was decided that customers should follow a process to enroll in Power Smart Pricing similar to signing up with a competitive supplier. The belief was that this would put the Ameren program on a more even footing with programs offered by competitive providers if they were to choose to serve the residential market. The CEC plays the role often thought of as the third party administrator, even though Ameren will still be the provider of the actual energy services and billing roles. A key component of the CEC solution for implementing Power Smart Pricing was partnering with Nexus Energy Software. CEC selected Nexus because of their deep experience in developing customer portals and supporting dynamic pricing programs. Nexus' role will include:
Promotion of Power Smart Pricing will begin in earnest in the fall, but the CEC has already been receiving calls from interested customers and has begun enrolling them in Power Smart Pricing. Once a customer has the necessary metering installed and is signed up, Ameren will measure their hourly energy usage, prepare a monthly bill, and forward the billing and usage information (including hourly prices) to Nexus. The bill information will be posted to the website, and customers will receive emails stating their bills are now available on-line. Customers on Power Smart Pricing will be able to see detailed information on their electricity consumption during the billing period, and real time hourly prices on the website. The Nexus system has the ability to provide hourly usage graphically or in table format, and customers can also take advantage of the energy audit and other services frequently provided to customers on regular rates. (See the screen shot from Nexus Energy Software below.) For example, the web site will provide energy conservation tips that customers can access to assist them in reducing their energy use either when real time prices are expected to be high or at other times.
While there continues to be much discussion regarding what information customers need to receive in order to be able to respond to time-based rates, it is widely agreed that it is important to provide customers a variety of options on the detail and presentation of the data. Some customers will want to view or download hourly prices and evaluate how to lower their bills by changing when they use energy, while others may be satisfied with total bill amounts and a few charts. The Nexus customer interface allows customers to drill down to the nitty gritty and to benchmark their household usage compared to other similar households matched on a variety of characteristics. Customer portals designed by Nexus have been used by many utilities across North America and are highly regarded by utilities, regulators, and consumer advocates. Customer Motivation and Participation As with other volunteer programs, customer enrollment and continued interest and participation are keys to a successful program. Power Smart Pricing offers customers access to lower prices the vast majority of hours while at the same time, exposing customers to higher prices during times of peak demand. Instead of paying Ameren or a competitive supplier to take on the risk of future energy prices, customers will be taking on that risk themselves, and either reaping the benefits or paying the price. One of the reasons for offering the program is the expectation that if customers reduce demand when prices are high, overall energy prices for all consumers will be lowered, all other things being equal. This requires having a large number of customers participating, and it may be the one of the first price responsive residential demand response programs large enough to impact wholesale market prices. Why would customers sign up? One motivation would be to save money on energy by both avoiding the risk premium embedded in flat rates and by focusing energy management efforts on times when prices are highest. In the chart immediately below, the real time prices (RTP) for the Ameren CIPS service territory are charted from February 1, 2007 to May 2, 2007 for the hour of 5 pm to 6 pm. The RTP price for this one hour for this date span ranged from $0.02 to $0.10 per kWh but the average price was $0.04 per kWh, which is lower than both the marginal price for the regular rate (shown on the chart) of $0.06 per kWh and the higher regular rate price for the first 800 kWh of $0.08 per kWh. All of the dates shown on the chart are in the non-summer pricing period of the regular rate.
Most of the RTP prices from 5 pm to 6 pm were lower than the regular rate price, with only 11 percent of the days having a price higher than the marginal regular rate. In contrast, if we look at the same time span for the 6 pm to 7 pm hour, the February 2007 prices were consistently higher than the regular rate. That would suggest a customer would be wise to shift energy use from 6 pm to 7 pm to an hour earlier, and make an investment in energy efficient light bulbs.
If a customer uses electric heat for example, it might be reasonable to set the thermostat higher between 5 pm and 6 pm to preheat the home for the evening, and to lower the thermostat setting after 6 pm. Customers might avoid using the clothes dryer on most weekday evenings after 6 pm in February. Sunday prices appear to low for all but a couple of Sundays during this time period. In March and April, customers would be less constrained since prices are normally lower than the regular rate. The hour from 7 pm to 8 pm looks similar to 6 pm to 7 pm across this time period. February prices tend to be higher during the week and on Saturdays, lower on Sundays. March and April are generally lower, and never very much higher. A customer could consider cooking meals that do not require energy consumption after 6 pm, using a crock pot that is turned off before 6 pm, avoid using the electric oven, etc.
If customers learn which energy consuming activities contribute the most to their energy bills in the winter and summer, customers can then make adjustments to their lifestyle and save additional money on their energy bills. The information available through the Nexus Energy portal would help customers reduce their energy consumption overall, and learn what activities are important to shift. Summer will be more challenging than other seasons since prices tend to be higher, and customers will want to keep their home reasonably comfortable. Customers can learn to trade other energy consumption for air conditioning, and many customers may find that with real time pricing, the payback period for investing in energy efficient air conditioning and heating will be significantly reduced. Customers could also invest in simple timers for television sets and other electronic devices that use energy even while not in use. With hourly detail data available, customers will be able to see, if interested, what impacts their change in lifestyle habits made in their hourly energy consumption. Power Smart Pricing will also offer selected customers an additional tool that does not require a computer. The PriceLight uses a visual signal of price levels via a glowing orb that will change colors based on the current price level. Customers can look at the PriceLight and gauge whether to use the dryer or to choose between cooking inside or barbeque outside, eat early or later. Once customers learn the value of making some relatively simple lifestyle adjustments, they can enjoy energy bill savings, contribute to improving the environment, and go on with their lives.
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