How did Pacific Gas & Electric (PG&E (News - Alert))—the investor-owned utility that services most of the northern two-thirds of California— sign up 100,000 ratepayers for SmartRate, its critical peak pricing plan?
The Association for Demand Response & Smart Grid (ADS), a Washington, D.C.-based trade association, has released a new case study, funded by the Department of Energy’s Office of Electricity Delivery and Energy Reliability, that examines how and why the voluntary program for residential customers has become a success.
When SmartRate first went to market five years ago, PG&E already had an existing, static time-of-use (TOU) rate for residential customers in place. On a voluntary basis, the program had been serving 80,000 customers since the 1970s. To participate, customers subscribed to and accepted a different tariff than regular customers on the standard tiered-rate plan, and incurred charges for the required interval meters.
However, when the rollout of smart meters gave interval metering capability to all PG&E customers, the utility had an opportunity to design peak pricing options to reach a wider customer base. SmartRate introduced an evolutionary change in approach, by developing a voluntary rider that can sit on top of either of PG&E’s residential rate options—either on standard tiers or on the time of use (TOU) rate option. It also works with either one of the utility’s low-income versions of those rates.
Thus, customers do not have to abandon their familiar rates; they “ease into” participation in more dynamic rates and demand response, according to the utility.
Specifically, when PG&E ratepayers agree to participate in SmartRate, they get:
- A voluntary peak pricing plan for residential customers with smart meters;
- A program that applies from June through September;
- A discounted energy rate at all other times, in exchange for agreeing to pay a higher rate during peak times; and
- A maximum of 15 peak event days called “SmartDays” over the course of the summer.
Dan Delurey, executive director of ADS, noted, “This case study highlights a trend where more and more utilities are offering demand response and time-based pricing programs to their customers.” He added, “As these programs become increasingly available, they become another tool that adds to traditional energy efficiency offerings to customers.”
Unexpected Results: A Halo Effect
Indeed, PG&E found that participation in the SmartRate initiative has created consumers who are not only more aware of the significant role they play in energy distribution—but who are willing to explore other product offerings from the utility, as well.
Susan Norris, senior manager, Pricing Products, at PG&E commented, “It’s a nice way to bundle products together. We can go after smart AC customers and say, ‘You already have this device, so if you got under this rate we could help you save money and you’d deliver more load. Conversely, if you’re on SmartAC [a device installed in the home that will receive a signal to use slightly less power during times of peak load], this is a rate that actually can be more advantageous for you because you have this device.”
In fact, the sign-up rates for SmartRate marketed to SmartAC customers are much higher than for non-SmartAC customers, and vice versa, as documented in the 2009 program evaluation report.
“The home area network technology that we’re going to start deploying will be another channel to use to notify customers and help them see how and when they’re using energy,” remarked Norris.
What’s more, PG&E’s purposeful and flexible approach to customer acquisition and support yielded solid participation of low-income customers in the SmartRate program, which went against industry analyst predictions.
Norris said, “There has been a lot of spin out there in the industry, saying low-income customers can’t participate—that they don’t deliver the load. In fact, they do deliver the load, in order to save money. To our surprise, in the first couple of years of the program, we had a disproportionately large number of low-income participants. About a third of our population is low-income, but 48 percent of participants on Smart Rate were also low-income customers. Since we’ve been doing more active participation and active engagement, that number has more normalized [to] around 20 percent to 28 percent.”
The case study found that PG&E learned a number of lessons during the implementation of the SmartRate Critical Peak Pricing Program, all of which can be applied to other service territories.
“Like the previous case studies released by ADS, the case study of the PG&E SmartRate program uses interviews to provide an inside view of implementing a demand response program,” said Delurey. “You get to hear from PG&E personnel [about] not just what their conclusions are, but how they got there, with all of the starts, stops and course changes along the way. We hope that practitioners and policymakers will use this to see what lessons were learned by PG&E and how they might be applied to their own work.”
Advice from PG&E includes the following:
1. Start with Segmentation–Success is dependent on customer participation, so make the most of the resources used to acquire and keep customers. Conduct thorough segmentation analysis before the program begins and choose a realistic customer target.
2. Focus on Customer Satisfaction–Design both a communication strategy and the rate program, itself, with a single objective: to create a clear, convenient, relevant customer experience. Even the way customers who don’t succeed on the program are treated has an impact on market transformation.
3. Create Cross-Functional Delivery Teams–Do not release a product until it is established that every functional team can deliver what customers say they want and need. Then, create a program team that is responsive to customers up and down the delivery chain. Every team member, from the IT team to customer service representatives, should have the potential to positively impact the customer experience.
4. Put Smart Meter Data to Proper Use–The ability to combine the personalized insight of interval data with management tools can create more value for consumers. But only if driven by an intention to better serve customers.
Other case studies available on the ADS site cover the Salt River Project (published June 2012) and PowerCentsDC (published February 2011).
Group Members of ADS are Ameren, American Public Power Association (APPA), Arizona Public Service (APS), California ISO, Comverge, Con Edison, Conservation Services Group (CSG), Constellation, Corporate Systems Engineering, Dimplex, Duke Energy (News - Alert), Emerson Climate Technologies, ENBALA, Energate, EnerNOC, Freeman, Sullivan & Co, GE, ISO New England, Itron, Landis+Gyr, MISO, National Grid, National Rural Electric Cooperative Association (NRECA), Navigant Energy Practice, Negawatt, NYSERDA, Olivine, On-Ramp Wireless, Opower, Pacific Gas & Electric (PG&E), PECO (News - Alert), PJM Interconnection, Reliant, Rodan Energy Solutions, San Diego Gas & Electric (SDG&E), Siemens, Silver Spring, Southern California Edison (SCE), Southern Company, and Tennessee Valley Authority (TVA).
Edited by Alisen Downey