Changing Behavior with Time-Of-Use Rate Plans?

Businesses have taken advantage of time-of-use rate (TOU) plans for years but its quickly becoming more common for residential customers as well.   Energy management applications and equipment may even become more prevalent as the industry turns to TOU rate plans for residents.   All of California's investor-owned utilities are in the process of switching the majority of their customers to time-of-use rates.  Fixed, flat, and tiered rates aren’t producing the results utilities and regulators are hoping for.  Instead they are hoping that time-of-use rate plans will encourage customers to change their behavior and use energy at off-peak times.  Not everyone is in favor of the plan.  “We fought against time-of-use rates because charging people more, just when they need electricity, is not the most consumer-friendly way to lower electricity use,” said Marcel Hawiger, staff attorney with The Utility Reform Network.  “We always push for doing other things — using carrots to reduce energy and using energy-efficient appliances — rather than punitive pricing. We lost that fight.” 

Are time-of-use rate plans punitive or will they reduce the need for fossil fuels and accelerate utility decarbonization goals?  Southern California’s Edison, which provides electricity to millions of customers in Los Angeles, Riverside, Orange, San Bernardino and Ventura Counties, will start switching customers this month but the process will take up to six months.  “This has been a long time proceeding at the California Public Utilities Commission, and part of it was to design rates that are more in line with the actual cost of providing electric service,” Edison spokesman Ron Gales said.  “Another big driver is that, during the daytime hours, California has this abundance of renewable energy available. One of the biggest sources is large solar farms. There’s so much energy that, on some days, the California Independent System Operator (which runs the electrical grid) has to sell it to other states or give it away because there’s such an abundance of it.”  Customers will be automatically switched to one of three time-of-use plans based on their history of consumption.  However, there are several contingencies already in place to protect customers from immediate and exorbitant changes to their bill.   Customers can opt-out of TOU rate plans to keep current tiered rate plans. SoCal Edison (SCE) assures customers that if they pay more on a TOU rate plan for the first 12 months than they would have paid on their previous tiered rate plan, SCE will provide the customer a one-time bill credit for the difference.  PG&E customers were also alerted to the these changes but were told that customers will pay no more than 7 percent more for electricity at peak times during the winter, and no more than 23 percent more during the summer.  Low-income customers on the California Alternate Rates for Energy (CARE) plan who live in “hot climate zones” and those enrolled in a medical-baseline program will not be automatically switched to TOU plans.

Starting in December, Arizona Public Service Co. (APS) will begin rolling residents over to a TOU rate plan.  For some, this means an increase of less than 1 percent but for others the increase could be as high as a 7 percent. The company said, "Our most important responsibility is to our customers, who depend on APS for the energy infrastructure that will power Arizona’s prosperity far into the future.”  However, others feel strongly that while there are short-term benefits, it will raise costs for customers in the long run.  APS believes it's worth the savings to the 69% of customers that will see a bill reduction of 2 percent.  "This case has been a long time in coming for APS customers," said Commissioner Anna Tovar.  

Time-of-use rates work well for businesses for obvious reasons but will they successfully change customer behavior?  Will these changes encourage residents to manage their energy consumption?