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TOU, prepay: they work
- Posted on June 27, 2012
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Sometimes one gets the impression that empowering the consumer is a lot like the weather. Everybody's talking about it, but nobody's doing anything about it.
Fortunately, as we know, that's not so. One ongoing, practical effort is the work being done by the Association for Demand Response + Smart Grid (ADS), meeting this week in Washington, D.C. For the meeting agenda click on the group's title. Dan Delurey, executive director, is focused on impacting utility policies and practices for all the right reasons we've discussed these past years: energy efficiency, rational capital investment, environmental stewardship, the list is long. (And, seemingly, Delurey never forgets a name and a face.)
The ADS' new case study, "Salt River Project: The Persistence of Consumer Choice," spreads the word on the successes in consumer choice by the Phoenix-based utility. (Click on the title to read or download the 16-pager.) The case study was authored by Judith Schwartz, principal at To the Point, who has written several key industry reports over the past two years.
(The other major case study performed by ADS, focused on the PowerCentsDC project, which last year offered many insights on involving stakeholders to ensure that grid innovations could benefit low-income utility customers. See "PowerCentsDC: A Model for Stakeholder Collaboration.")
Whether you've followed Salt River Project (SRP) or not, I urge you to read this succinct new report. I'll just provide a few highlights to tip you off to the contents.
First, SRP was selected as a case study for a handful of very good reasons:
- SRP, a municipal utility, has pioneered time-based pricing and prepay for more than 30 years;
- Offering consumer choice is part of the utility's culture;
- Other utilities can take lessons learned at SRP and apply them, based on the established link between customer choice and satisfaction;
- Smart meters are helping evolve SRP's established customer choice programs;
- By May, SRP had installed smart meters in 86 percent of its customers' homes in the Phoenix metro area.
Let's go to a few of those lessons learned. When you read them, I think you too may have an "aha moment," as I did.
- Make programs voluntary; that is, opt-in. And allow customers to reverse their decision.
- Offer pricing programs that can be graphically illustrated for comparison's sake and structure them to fit customers' schedules.
- Prepay can benefit a wide swath of customers, so don't limit such programs to customers with credit issues. And don't apply service charges to payments.
- Help steer customers to the programs that best serve them and provide tools and customer service that can deliver secure, account-specific comparisons.
- Program benefits can be enhanced by interval meters.
My own view of prepay has evolved. Initially, I thought the language around it smacked of utility-speak, masking advantages to the utility and disadvantages to the customer. But making prepay opt-in definitely offers an alternative to month-end surprises that can roll up into significant arrears. That means customers have the opportunity to set a budget and the motivation to meet it. And if they don't do well with that responsibility they can change their mind and opt-out. For utilities, those arrears often go unpaid. Limiting them improves cash flow.
To close this piece, I'll just cherry pick a couple quotes from the report on time-of-use rates and let you have a read on your own.
In contrast to the blather you hear about time-based pricing being a way for utilities to gouge customers when they need peak-time air-conditioning in summer, for instance, or the other canard, that TOU rates mean doing your laundry at midnight, listen to Mike Lowe, associate general manager and chief customer executive.
"We have had residential time-of-use as an option - and it is an option - since 1980," Lowe said. "Today we have 22 percent of our residential customers on our seasonal Time-of-Use plan with a seven-hour window and another 6 percent on `EZ-3' (3-6 p.m., M-F, all year).
"Customers who have been on these rate plans for any time at all are very adept at shifting their load. They don't run the dishwasher of the pool pump on peak. They set their air conditioner a little higher on peak. TOU customers typically have programmable thermostats for their air conditioners and timers on their water heaters and pool pumps."
In short, you can bray all day long about doom-and-gloom, but the reality is: these voluntary programs work and they provide the degree of demand management that benefits the utility, keeping a lid on overall costs for SRP. And customers are more satisfied as they gain more control over their usage and resulting bills.
Intelligent Utility Daily
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