Smarter meters are just the start
TOU rates have been a part of the bill for commercial and
industrial customers for decades, but the high cost of analog meters capable of providing hourly usage-tracking
made the practice cost-prohibitive for residential users—a
situation that has changed considerably in the last decade.
“Fifteen years ago, a meter that would measure time of
use would cost $1,000,” said Jim Lazar, senior adviser with
the Regulatory Assistance Project, a nonprofit providing
research and training to state utility regulators. “Now it
The dramatic price reductions were aided by econo-
mies of scale enabled by 2009’s American Recovery and
Reinvestment Act—more commonly known as the eco-
nomic stimulus program. Under this legislation, some
$3.4 billion of federal money, and another $4.6 billion of
matching private funds,
were poured into efforts to
smarten up our electricity
system. Advanced metering
gained the lion’s share of
that funding, and homeowners across the country
saw their old, spinning-dial meters replaced with
newer models that feature blinking LEDs.
Along with the meters came promises of refrigerators
and electric vehicles that have the ability to talk to us and
our utilities. In practice, though, electric utilities and their
state regulatory organizations have been slow to explore
these new capabilities. However, the addition of large
amounts of intermittent energy resources, such as solar
and wind generation, is motivating regulators and utilities
to take a closer look at TOU options, Lazar said.
He said the value to the utility is in getting customers
to move their usage around, and the appeal in that has
“There are utilities around the country that are moving
that way,” he said.
In Arizona, for example, both Arizona Public Service
(APS) and the Salt River Project have TOU rates in place.
APS has enrolled 40 percent of its customers in the TOU
program, according to Chris King, global chief regulatory
officer for Siemens Smart Grid. Baltimore Gas & Electric
has close to 90 percent of its customers on its Peak Time
Rewards program, he added.
In all of these territories, however, the rates are structured as opt-in programs consumers have to actively choose
to participate in, which can make for slower uptake. Lazar
cited Texas, where customers choose their electricity supplier, as an example of the challenges faced in enrolling new
participants. There, fewer than 10 percent of customers opt
into TOU plans, and companies are beginning to offer free
night and weekend service, similar to old telephone-com-pany promotions, to sweeten the deal.
Thermostats that dial up savings
It seems the device that may lead us to broader adoption
of TOU rates and demand response at the residential level
will be another recently smartened product capable of
working in tandem with new advanced meters—the thermostat. Air conditioning and, in the South, electric heating
systems remain the biggest
electrical loads at the residential level, so an electric
utility could have a big
impact on its peak-demand
requirements by influencing how customers control
The Nest thermostat
(and other recently introduced competitors) is now marketed with steep discounts
provided by many utility energy-efficiency programs
because of its ability to take some of the guesswork out of
previous-generation programmable models. Newer products take automation a step further by communicating with
smart meters to base actions on rate signals passed through
to the devices through a homeowner’s meter.
“Now you don’t have to be on-site,” said Yann Kulp, vice
president of residential energy solutions, Schneider Electric.
Schneider Electric has a new Wiser Air thermostat
designed to learn a household’s heating and cooling patterns and respond to utility-supplied rate data. In a TOU
rate setting, this capability could automate the response
of customer systems, enabling true set-it-and-forget-it
operation. For example, customers could set price thresholds for automated setbacks, so a kilowatt-hour (k Wh) rate
shift from $0.10 per k Wh to $0.15 per k Wh might trigger a
thermostat adjustment of 3 degrees, and a higher rate shift
could result in a 6-degree adjustment.
In this example, the meter would act as a transmitter
of real-time data from the utility, communicating through
What needs to change is the relationship
between the utility and the customer. The
utility has to be ready and be willing to
engage with their customers, and just learn.
—Rob Thormeyer, National Association of
Regulatory Utility Commissioners