CARE

Experience with time-of-use pricing programs shows that a large majority of low-income customers will benefit from dynamic prices. In fact, not making such prices available to these customers might be harmful. In the most efficient system, all customers will face the same prices—and policy makers can provide direct relief to ease the burden for low-income customers.

Are residential time-of-use prices only effective for middle class households, or do low-income customers benefit too—as authors Lisa Wood and Ahmad Faruqui asserted in their October 2010 article? Data from pilot programs show that low-income customers exhibit a reduced ability to benefit from dynamic pricing. Demand response programs should accommodate the realities of low-income customers’ consumption patterns.

Do low-income customers respond to dynamic rates? The answer is yes, and in fact such customers can benefit from dynamic pricing without shifting loads”contrary to conventional wisdom. A study co-authored by the Edison Foundation’s Institute for Electric Efficiency and the Brattle Group shows that restricting access to dynamic rates might actually be harmful to most low-income customers.

In light of all the excitement created by smart-grid regulatory initiatives and stimulus funding, three clever tech startups have come forward with proposals for novel grid projects. In California, Western Grid Development proposes to install energy storage devices ranging in size from 10 to 50 MW at various discrete and strategic locations in PG&E’s service territory where the California ISO has identified reliability problems. Second, a company called Primary Power proposes to deploy a total of four advanced, 500-MVAR static VAR compensators (SVC) at three separate locations within the PJM footprint. Third, in Clovis, N.M., Tres Amigas plans to allow power producers to move market-relevant quantities of electric power and energy between and among the nation’s three asynchronous transmission grids: ERCOT and the Eastern and Western Interconnections.

The advent of the smart grid is sparking interest in intelligent rate design. But while state and federal goals encourage more efficient rate structures, regulatory and political considerations complicate the process. Getting to a next-generation rate design will require a phased transition.

Contrary to conventional wisdom, electricity demand isn’t immune to price elasticity, and rate designs can encourage conservation. In particular, inclining block rates coupled with dynamic pricing can cut electric use by as much as 20 percent.

ON TUESDAY, NOVEMBER 3, THREE WEEKS AFTER I wrote this column, California voters narrowly defeated Proposition 9. In case you missed it, that was the ballot initiative that would have cut off funding for nuclear power in California through securitization or any other fancy financing for stranded costs. A "yes" vote would have told utilities, in effect, to "take these bonds and shove it."

But the voters said "no," however, and I'll tell you why - even before the first ballot was cast.

In the end, Prop 9 failed for the same reason that George McGovern lost to Richard Nixon in 1972.

AMERICANS ARE fascinated with lists. There are lists of just about anything you can name, from the Fortune 500 to baseball batting averages. There's even a book of lists. We especially like to rank "top tens," like the 10 best cities to live in or the 10 worst school districts in America. Television has popularized these lists.