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Test program sells electricity by the hour
January 14, 2005
BY MARY WISNIEWSKI Business Reporter
If you knew you could buy groceries cheaper if you waited until after 10 p.m., would you do it? How about electricity?
In a three-year test program, about 1,300 Commonwealth Edison customers in the city and suburbs are buying their electricity on an hourly basis, rather than using a flat rate. The customers learn when electric rates are cheap -- like late at night -- and when they'll be high, like during hot summer afternoons.
Confounding the notion that customers wouldn't bother monitoring their usage, ComEd customers on the "Energy Smart Pricing Plan" have made small but significant changes in the way they use electricity and saved about 15 percent on their bills.
"The prevailing wisdom was that it's too complicated, people won't understand it, they won't care, they won't do anything to change their behavior," said Kathryn Tholin, general manager of the Community Energy Cooperative, a non-profit Chicago group that is conducting the program in conjunction with ComEd. "Our experience has been completely the opposite. When people have the opportunity to save, they will."
Besides saving money for individual customers, reducing use during peak periods like summer afternoons can take the strain off the electric grid. This can decrease the risk of a blackout.
"Sometimes very small reductions in load can have very large effects," said Lynne Kiesling, an economics professor at Northwestern University. "Programs like this can contribute to grid reliability."
Tholin said the Chicago area experiment -- the first of its kind -- has attracted interest from other utilities and regulators around the country.
"It's working fine," said Ted Marlovitz, a Northwest Side retiree who joined the test program. "People don't really alter their lifestyle much, and they're saving money."
Normally, electricity customers are billed according to an average rate, so it doesn't matter when they use their power.
To participate in the program, ComEd customers needed to join the cooperative -- a $10 one-time membership fee. Participants had special digital meters, worth $120 and paid for by the cooperative, installed at their houses.
Under the Energy Smart program, ComEd provides the cooperative with hourly market prices for the next day. Customers can check the prices on a Web site. If the prices will exceed 10 cents a kilowatt hour, the cooperative sends e-mails or calls people in the program to alert them to the price spike, so they can adjust their usage.
Prices are often higher during the summer, particularly in the afternoon. Weekend prices are generally lower, as are evening and morning prices, especially between 10 p.m. and 6 a.m.
Jo Volkening, a medical transcriptionist who lives near west suburban Burlington, said customers on the program can look at their kilowatt usage over a month, to see what time of day they're using the most electricity.
"You can look at that and decide when to move something to a cheaper rate," Volkening said. For example, if you're doing laundry on weekday afternoons, you might decide to move it to the weekend to take advantage of the rates, Volkening said.
She said she has friends on the program with a hot tub who set their timer so the tub heats during a cheap electric window.
Marlovitz said that when he knows electricity will cost more on a summer afternoon, he'll turn up the temperature on his thermostat, and use ceiling fans to keep things comfortable. "The house holds temperature well, so for a few hours it's not a problem," Marlovitz said.
Participants in the program lowered their usage on the highest-priced days by 20 percent, according to ComEd.
The experiment, which is closed to new customers, ends in December. Beyond that, ComEd will work with the cooperative to look at ways to expand the program. One possibility is to allow people to pay for their own meters, said Denise Bechen, ComEd's manager for the program.
Hourly pricing might become easier to do once electrical deregulation happens in Illinois in 2007, and utilities procure power on the open market, Tholin said.
Even if hourly pricing is available to more electric customers, Volkening said she doesn't think everyone would take advantage of it.
"I'm sure you'd still get some people who run their AC 24 hours a day," she said.
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