Electricity use curbed by pricing? Not exactly

A Washington, D.C. pilot program reveals interesting data about the way U.S. consumers might respond to smart meters and peak usage plans.

Candace Lombardi
In a software-driven world, it's easy to forget about the nuts and bolts. Whether it's cars, robots, personal gadgetry or industrial machines, Candace Lombardi examines the moving parts that keep our world rotating. A journalist who divides her time between the United States and the United Kingdom, Lombardi has written about technology for the sites of The New York Times, CNET, USA Today, MSN, ZDNet, Silicon.com, and GameSpot. She is a member of the CNET Blog Network and is not a current employee of CNET.
Candace Lombardi
3 min read

A Washington, D.C. program intended to determine the effects of smart meters on household electricity use uncovered habits that could have ramifications in the way electric utilities implement pricing plans to consumers.

Bottom line: socioeconomic status does not matter when it comes to saving energy; most customers with access to smart meters reduce overall electricity use when presented with their habits and a financial incentive to save. Most would also rather curb usage or face high premiums a few times a year during extreme peak events than worry about keeping track of daily peak and off-peak usage hours. So-called peak reductions in summer are greater than those in winter and, not surprisingly, most of those peak summer events occurred when daily temperatures rose, according to the results of the study released Thursday in conjunction with the PowerCentsDC smart meter program.

The pilot program was conducted by eMeter Strategic Consulting and the Smart Meter Pilot Program in Washington, D.C. with 900 existing Pepco electricity customers from all eight city wards, including low-income customers. The participants were asked to use smart meters and smart thermostats to manage their household electricity use. The group was offered a choice of three pricing plans for the program which began on July 21, 2008, and ran through October 2009.

When asked to name the methods they used to reduce consumption during peak events, 60 percent of participants said turning off appliances, while 59 percent said they adjusted the air-conditioning. Only 25 percent said they adjusted their heating system, but it should be noted that 54 percent of the participants had a heating system powered by natural gas.

"Summer peak reductions were greater than winter, implying more discretionary load," according to the PowerCentsDC Program final report released Thursday.

In addition to smart meters, PowerCentsDC participants with central air-conditioning systems were given smart thermostats that could modify temperature during peak usage events. PowerCentsDC/Smart Meter Pilot Program

The extensive program went deeper than just trying to see how consumers could be encouraged to use less electricity during peak loads. It evaluated all manner of variables, including whether consumers generally preferred having an opportunity to curb usage and save money, or would rather pay extra for electricity use at peak usage times. It even determined habits of homeowners versus renters.

All households in the study were given smart meters. Those with central air conditioning systems were also given smart thermostats that could be controlled remotely by Pepco, as well as programmed for desired daily temperature by the consumer. Participants were then given the option to pick from three different pricing plans.

The most popular plan was one in which customers were charged five times the average price during "critical peak pricing" events, which occurred about 60 hours per year, and offered a slightly reduced rate for the remainder of the year.

People seemed more willing to curb electricity use, or face paying an extremely hefty surcharge during peak events a few times a year, rather than curbing electricity on a daily basis during specified peak hours, according to the results of the study.

The second plan was an hourly pricing option that offered peak versus off-peak pricing based on the time of the day electricity was used. The third plan offered rebates to customers who voluntarily curbed their electricity use during peak events.

For all three plans, consumers could choose to allow their smart meters to automatically adjust a home's electricity use when notified of a peak event. Consumers were able to find out ahead of time when peak hours might occur via an automated phone message, e-mail, or text, and choose to reduce consumption during those hours. Participants also received a chart illustrating their usage habits with each monthly electricity bill.

The results of the study found that more than 90 percent of all PowerCentsDC participants ended up saving on their Pepco electricity bills, compared to non-smart meter customers. And 93 percent of participants said they preferred using a smart meter and a peak rate system than Pepco's current rate plan.

"The report will be utilized by the White House as a best practices example for other states considering their own smart-grid deployments, highlighting how utilities and consumers can interact to maximize benefits of energy efficiency and cost savings for all parties," eMeter said in a statement.

The program was conducted by the Smart Meter Pilot Program, a nonprofit organization whose members include the electric utility Pepco, the D.C. Office of the People's Counsel, the D.C. Consumer Utility Board, the International Brotherhood of Electrical Workers Local 1900, and the D.C. Public Service Commission.