SMUD flirts with time-of-use rates

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By: SGN Staff

Quick Take: SMUD wants to replace traditional residential pricing with time-of-use (TOU) pricing instead. That's news enough, but what really caught my eye is that the local newspaper is endorsing the idea. Maybe it IS possible for forward-thinking utilities to learn effective community engagement. To be fair, it's easier for a municipal utility to garner local support. Customers are typically more suspicious of investor-owned utilities. Even so, this experiment bears watching. Not just for the design of the rate structure, but also for the ways SMUD is creating support and consensus. - Jesse Berst

The Sacramento Bee has penned an editorial endorsing the Sacramento Municipal Utility District's (SMUD's) new rate proposal as a "farsighted change." The plan would phase out the current two-tiered system over four years. By 2017, all residential customers would pay the same price per unit of electricity no matter how much they used. Beginning in 2018, they would pay higher prices during peak summer hours. Currently, households pay 9.5 cents per kilowatt hour for the first 700 kilowatts per month. Then 18 cents per kwh for any power they use above that threshold.

The newspaper said "the current system results in heavy users unfairly subsidizing low-use customers who use a disproportionate amount of electricity during times of peak demand. It sends the wrong price message to customers." It pointed out that the new rates could mean lower bills for those willing to change behavior. For instance, a family could wait until the evening to wash and dry laundry, instead of doing it during the peak period. Sacramento's peaks occur on hot summer days between the hours of 4 p.m. and 7 p.m.

The editorial also made the link between smart meters and the ability to gain the benefits of TOU rates. "The 600,000 smart meters SMUD installed over the last few years have given the utility the ability to measure not just how much electricity its customers use but, most critically, when they use it. That allows for more efficient use of electricity, which means SMUD can avoid building new power plants. That not only minimizes the utility's carbon footprint, it saves money for SMUD and its customers.

Are you aware of other utilities doing a good job of selling the benefits of TOU pricing or other smart grid initiatives? Use the Comment form to suggest other utilities worth watching.

Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.

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