Honey, I’m Home - How Are Electricity Prices for Tomorrow?

Lawrence KotewaProject Manager, Community Energy Cooperative

April 13, 2005

Community Energy Cooperative at the Center for Neighborhood Technology2125 West North Avenue, Chicago, IL • 1-773-486-7600 • www.energycooperative.org

Key characteristics of ESPP’s Real Time Pricing for Residential

Customers

Unique consumer/utility partnership Straight-forward program Provides pricing and information It’s low tech and low cost People are saving money People are changing behavior People like it!

Purposes of Program

To incent efficient use of energy and reduction of peak demand

To provide benefit to small customers from deregulation

To provide options that can significantly reduce energy costs for households

The Conventional Wisdom: Why Retail Real-Time Pricing For Mass Market Customers Won’t

Work

The market is too volatile and risky There is no value for mass market

consumers The meters are too expensive Mass market consumers won’t respond to

price signals, are unable to manage risk and volatility and need to be protected

….Our experience to date runs counter to each of these

Community Energy Cooperative

The Energy-Smart Pricing PlanSM

Community Energy Cooperative

Formed in 2000 by the Center for Neighborhood Technology

Supported by ComEd and other funders

The Cooperative has developed and managed a range of community-based demand reduction pilot programs

Energy Pricing

Rate RHEP: distribution charge plus variable energy charge based on wholesale prices

Models bundled rate/market rate differential in Illinois’ post-2006 environment

Day-ahead prices and RTO load shape used to create next day hourly prices

Cooperative created price cap at $0.50/kwh for energy

Number of Hours in Price Bins

16,557

15,326

7,952

4,104

2,354

1,132

524

281

206

435

119

43

47

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

below $0.02

$0.02 - $0.03

$0.03 - $0.04

$0.04 - $0.05

$0.05 - $0.06

$0.06 - $0.07

$0.07 - $0.08

$0.08 - $0.09

$0.09 - $0.10

$0.10 - $0.20

$0.20 - $0.50

$0.50 - $1.00

above $1.00

Number of Hours

January 1, 1999 through August 6, 2004 Total Hours = 49,080

49,080 Hours Of Market Prices

89.5% of hours are below 5¢/kWh. Average Price is 2.51¢/kWh

98.5% of hours are below 10¢/kWh. Average Price is 2.86¢/kWh

Program Components

Interval recording meters Prices available through web and

phone Energy management/price response

tools Information about usage Instructions and tips on how to reduce

usage during peak periods Ongoing energy efficiency information

High price alerts via phone, e-mail

Web Access to Detailed Energy Use Data

Participant Demographics

750 participants in 2003; 1100 in 2004 A variety of air conditioning types:

40% Window air conditioning 40% Central air conditioning 20% No air conditioning

56% from the city of Chicago, rest suburban 10% speak Spanish 80% single-family homes and two-unit

buildings (average monthly use 658 kWh) 20% multi-family homes (average monthly use 406 kWh)

Hourly Prices

$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

$0.12

$0.14

$0.16

Date

Pri

ce (

$/k

Wh)

One Member’s Response: Changing Thermostat Set Point In

Response To Price Notification

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1:00 AM 5:00 AM 9:00 AM 1:00 PM 5:00 PM 9:00 PM

kW

6/23/2003

6/24/2003

6/25/2003

56% Peak Demand Reduction Compared To Previous Day

Central Air Conditioner Users Respond To Price Alerts

0

0.5

1

1.5

2

2.5

3

August 26, 2003 August 27, 2003 August 28, 2003 August 29, 2003

kW

Control GroupParticipantsPrice Alert

Sent. 24% Reduction of Peak Demand Price Alert

Sent. 19% Reduction of Peak Demand

No Price Alert Sent. No Reduction of Peak Demand

Key Findings

1. Participants respond to peak period prices Price elasticity of .042 across full range of prices Over half of all participants showed significant

response to high price notifications Vast majority of participants showed some

response Aggregate demand reduction was as high as 25%

during notification period Over 80% of participants modified their AC use Over 70% of participants reported modifying

their clothes-washing patterns

Key Findings, cont.

2. Participants liked the program Found it easy to understand and manage

82% said program was “quick and easy” Participants were happy with the financial

results of the program—average savings to date are approximately 12%

In addition to saving money, participants valued:

Bill control Environmental impact Greater understanding of energy use

Other Findings

Lower income participants were disproportionately represented in “high responder” group

Households with window ACs maintained their price-responsive behavior better across multiple high-priced hours

2004—overall price responsiveness increased; notification response reduced (likely due to weather effects)

Contrary to conventional wisdom--

Simple, understandable RTP program for residential customers is possible

Residential customers can and do respond to price signals.

For further information

www.energycooperative.org

Lawrence Kotewa, Project Manager larryk@energycooperative.org