Pricing, Metering, and Default Service Reform

Paul Gromer

Peregrine Energy Group

Pricing and Metering Working Group

Recommendations developed by working group. Working group ably supported by NEDRI consultants

Rick Weston and Jim Lazar. Working group included representatives of:

Metering companiesUtilities Regulators Low income customer advocatesCompetitive retail suppliersEnvironmental advocatesDemand response providers

A series of collegial meetings

And one on one discussions

Producing a happy consensus

Issues “It’s the price, stupid.”

In most markets, customers don’t get paid not to use. Instead, they pay the full cost of what they do use.

The evidence is that electric customers do respond to price signals. Just like all other customers.

However, flat, fixed prices are the norm in the industry. Those prices create no incentive to shift load.

“No, it’s the meter, you moron.” You can’t price what you don’t meter. Dumb, kWh meters do not support anything but flat, fixed prices.

“No, it’s the cost, idiot.” I’m not paying for all those fancy new meters.

“No, it’s the politics, you bozo.” I’m not instituting time of use rates for default customers. My predecessor did

that. That’s why I’m here and he’s not.

Strategy Set One: Improving pricing for customers to allow price-induced DR

PM-1: PUCs should investigate time-sensitive pricing for default service customersPUCs should bite the bullet and take a hard look at this.Pricing may vary by customer size and by availability

of meteringOptions to consider include:

Real-time pricing Critical peak pricing Inverted block rates

Strategy Set Two: Support Demand Response in the mass market

PM-2A: PUCs should investigate wide scale deployment of advanced meters for mass market customers, and the associated rate designs those meters would enable. Investigations should examine:

Costs Benefits (including, but not limited to, demand response benefits) Metering deployment options

– Method of deployment has a big impact on cost

Answers will be state specificNEDRI offers a protocol for these investigations

Strategy Set Two (cont.)

PM-2B: For customer classes for which advanced metering is not cost effective, utilities should conduct load research, and establish load profiles to support DR without new meters.

PM-2C: Target efficiency to peak load uses

Strategy Set Three: Cross-cutting Efforts

PM-3A: Price default service to cover all relevant costsPremise: Competitive retail suppliers are better suited

to provide DR services to customers than are utility default service providers.

NEDRI consensus regarding large customers; differing views regarding small.

Default service pricing that covers all relevant costs will encourage customer migration to competitive suppliers, which in turn will foster demand response.

Strategy Set Three cont.

PM-3B: Share DR revenues between customers and utility DR providers to ensure adequate “headroom” for independent DR providers.

PM-3C: Remove distribution company disincentives to deliver aggressive DR programs.Mechanisms could include incentives, lost

revenue adjustments, revenue capped PBR.