Utilities Try Time-of-Day Rates to Curb Costs … and Use?

On April 17, Idaho Power became the latest utility to offer a demand-response option for a select few of its 400,000 residential customers in an effort to help change home energy-use behaviors, better align its own costs for procuring peak-hour energy, and perhaps reduce the need to build more power plants.

The state’s largest utility is piloting a time-of-day (TOD) [please link to: www.idahopower.com/TOD] rate structure for up to 1,200 residential users. The voluntary program identifies daily peak and off-peak times and related kWh use rates depending on the time of day and the season, specifically June-August (summer peak) and the rest of the year; weekends and holidays are considered off-peak regardless of the season.

Boise-based Idaho Power joins more than 500 energy providers nationwide that offer demand-response programs. According to a 2010 report  by the Federal Energy Regulatory Commission, such programs affect a potential peak load reduction of more than 53,000 megawatts (MWs), or about 7.6% of domestic peak demand. That’s a 42% increase compared with a 2008 report, and a 79% boost from 2006.

In addition, more than 169 power-supplying entities have TOD programs, affecting approximately 1.1 million residential customers nationwide.

For Idaho Power customers who consume more than 800 kWh per month (the average is 1,050 kWh), the time-of-day rate structure could lower their electric bills and overall energy consumption ... if they choose to change their behavior by using appliances during off-peak hours and curtailing demand in their cooling systems, among other tactics.

For example, running two loads of laundry (washer and dryer) before 1 p.m. or after 9 p.m. in the summer would save 86% or $0.51 cents per kWh compared with the peak summer hour rate.

Currently, rates are fixed at $0.883 for the first 800 kWh used and $0.846 above that threshold, regardless of the season or time of day. “This program gives customers a choice as to how to pay for electricity,” says Darlene Nemnich, a senior regulatory analyst for Idaho Power. It is also fairer, she says. “Peak-time users should pay a premium for that.”

But for the program to pay off for residential customers (and ultimately the utility), she says, those users have to commit. “It requires a behavioral change that you have to want to make.”

The pilot program and likely a more extensive rollout next year would not be possible without the advanced meters that Idaho Power installed for residences over the last three years, which enable the utility to track TOD usage instead of simply overall monthly consumption. “We needed the smart metering infrastructure to do it,” says Nemnich.