Residential Real-Time Pricing in Illinois:
The Policy Implications of Measuring and
Evaluating the Impact of Dynamic Pricing
Anthony Star
Director of Policy and Evaluation
CNT Energy
Richard Voytas
Manager, Energy Efficiency and Demand Response
Ameren
National Town Meeting on Demand Response and Smart Grid
July 14, 2009
How We Got Residential RTP In Illinois
• In 2006 Illinois General Assembly unanimously passed
legislation (Public Act 94-0977) that required the two
large utilities in the state to offer real-time pricing
programs as an optional service for residential
customers
• Elsewhere the debate has been more contentious:
– “California should step back from the rate-base oriented mode of
promoting a combination of supply side resources and advanced
meters, even though those programs are most advantageous to
utility shareholders, while giving short shrift to other peakoriented programs.” (TURN, 2006)
• Illinois was different due to the success of the EnergySmart Pricing Plan, a pilot program run from 2003 - 2006
The Legislative Mandate:
Setting the Stage
“The Commission may, after notice and hearing, approve the tariff or
tariffs, provided that the Commission finds that the potential
for demand reductions will result in net economic benefits to
all residential customers of the electric utility.
In examining economic benefits from demand reductions, the
Commission shall, at a minimum, consider the following:
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improvements to system reliability and power quality,
reduction in wholesale market prices and price volatility,
electric utility cost avoidance and reductions,
market power mitigation,
and other benefits of demand reductions,
but only to the extent that the effects of reduced demand can be
demonstrated to lower the cost of electricity delivered to
residential customers.”
The Legislative Mandate:
Proving Value
After four years, Commission will evaluate
program to see if it is “resulting in net benefits to
the residential customers of the electric utility.”
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• Currently cost of program split between
participants and residential non-participants. Bill
savings should justify costs for participants, but...
• The challenge will likely be to evaluate benefits to
non-participants, and how costs should be
apportioned to recognize those benefits
The EM&V Challenge
• Meaningful levels of
program cost associated
with PSP
• Buy at market price/sell at
market ~ theoretical TRC
=1.0 absent program
costs
• Profound implications for
EM&V
– Quantify increased system
reliability
– Market power mitigation
– Other
Current Programs
Key differences:
PSP uses day ahead pricing, ComEd RRTP real-time pricing
PSP capacity cost and charge rate varies monthly, ComEd
RRTP capacity cost and charge rate is annualized
Ameren
Power Smart Pricing
• $2.25 per month fee to cover part of the incremental cost of
metering and program administration.
• All other residential customers pay a small charge, currently $0.07
per month
• Initial 12 month stay required
• CNT Energy’s role as Program Administrator is to provide
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Outreach/program marketing
Education tools for both efficiency and peak demand management
High price notifications
Online tools
Research and evaluation
See
• Participation Growing
– End of 2007
– End of 2008
– July, 2009
500
3,000
5,500 +
www.powersmartpricing.org
for more information
How Participants Respond
• 88% changed energy use after joining the program
• 71% say participating is quick and easy
• Another 20% say its not difficult
• Actions ranged from simple actions to reduce air
conditioning use to more extensive turning off
lights, closing blinds, etc.
Changes in Air Conditioner Use
• 70% raised temperature on most summer days
• 21% only on hot or very hot days
• But 9% rarely or never
2008 Bill Impacts
•2007 Savings approximately 13%
•2009 Savings 30%
(but likely to decline somewhat
because of higher summer prices
and Ameren’s flat rates went down in
June)
Including the estimated conservation
effect of 186 kWh per customer would
result in additional $18.60 savings
(Savings percent would rise from 7.7% to
9.1%)
Power Smart Pricing Consistent With
Other Evidence of Price Response
From Summit Blue Evaluation of 2008 Power Smart Pricing Program:
http://www.icc.illinois.gov/docket/files.aspx?no=06-0691&docId=136151
Approaches to Assessing Market
Impacts
•
How to apportion costs between participants
and non-participants
– Current incremental metering costs don't reflect a
future full AMI/Smart meter scenario
– Legislation is clear, look at
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improvements to system reliability and power quality,
reduction in wholesale market prices and price volatility,
electric utility cost avoidance and reductions,
market power mitigation,
and other benefits of demand reductions,
Potential Approaches
• Summit Blue Reviewed Past Approaches:
– Summit Blue report for the International Energy Agency (IEA)
– Brattle report for Mid-Atlantic Demand Response Initiative
(MADRI)
– Neenan Testimony in Illinois Commerce Commission (ICC)
Docket 06-0691
– Power Systems Engineering Review Council (PSERC) opensource simulation models
• Have proposed a methodology that combines aspects of all four
• Stay tuned late 2010/ early 2011 as our Commission and
stakeholders debate this
• Given size of program impacts will likely still be more modeled than
actual
What We Know/Don't Know
• Dynamic pricing changes energy use and saves
participants money
– Studies/Pilots only are showing nuances of
differences
• Cutting peak demand might change energy markets
– Mostly theoretical, still need real evidence
• Potential scale of participation not known, customers
don't know why they might want dynamic pricing
– We know that once they do, they like it
– But no one has gotten the value proposition quite right
For More Information
Anthony Star
Director of Policy and Evaluation
[email protected]
773/269-4017
CNT Energy
2125 West North Avenue
Chicago, IL 60647
www.cntenergy.org
www.powersmartpricing.org