Off-Peak Laundry? Pricing Power by the Hour
Wednesday, December 12, 2007
Pepco is about to start sending personal e-mail messages to Jonathan and Lauren Schwabish every few hours that could determine when they do the dishes, wash the baby's clothes or turn on the air conditioner.
The couple will learn when the price of electricity for their old Capitol Hill home will spike the next day because Washington's winter chill or its steamy summer is nudging up the demand for power.
If they wait to turn on the washing machine or they turn off the air conditioner when the sun beats down, they'll be rewarded with a credit on their utility bill that could reach hundreds of dollars a year. Other D.C. residents have agreed to pay rates eight times the average if they use their appliances at peak times but rates well below it at off-peak hours, as part of a pilot program starting next month.
"Lexus lanes" are coming to the electricity grid. Energy conservation programs that died when the power market switched from regulation to competition are back, but with new technology and aggressive demands from government regulators facing anger over rising prices.
Just as long-awaited high-occupancy toll lanes will charge drivers a fee to travel at rush hours, electricity customers will pay more when the grid is congested and less when it's not. If the strategies succeed, customers will not only slash their bills but also reduce pollution from coal-fired generating plants.
And within a few years, energy experts predict that Washingtonians will live like the cartoon Jetsons, their homes powered by computer chips that shut down washing machines and dishwashers when electricity prices soar.
"It's not far-fetched," said Mark Case, senior vice president of regulatory services for Baltimore Gas & Electric, which will start testing advanced meters in 5,000 Maryland homes in April, including some in Howard, Anne Arundel and Prince George's counties.
Jonathan Schwabish, an economist for the federal government, got a letter from Pepco this fall telling him he was randomly selected for a two-year pilot program to encourage energy conservation in 1,200 D.C. homes. "I like the whole idea behind it," he said. "I could see targeting the air conditioning not to run between 12 and 2 if that's when the peaks will be. Will it be a hardship? Maybe, but we're trying to be as environmentally friendly as we can." His summer electric bills run about $100.
Meters that can read prices every hour are also the centerpiece of aggressive conservation efforts in Virginia and Maryland, where Gov. Martin O'Malley (D) has pledged to reduce the state's electricity consumption by 15 percent by 2015. Fluorescent light bulbs that outlast traditional incandescent ones, rebates on energy-efficient appliances, free energy audits -- all are on the table for customers of Pepco, Virginia Dominion Power and BGE, among others.
"At the end of the day, people want to understand what their electricity is costing them and what they are getting for it," said Steven B. Larsen, chairman of the Maryland Public Service Commission, the state's utility regulator. "The basic concept is that technology can help save us money."
Smart meters have not been mandated, but they are being used in several states. The Illinois legislature has required the expansion of peak pricing programs, and Florida and California are among those conducting pilot programs.
Consumer advocates, however, have expressed concerns that "time of day" pricing puts elderly and disabled customers at a disadvantage because they cannot easily reduce their energy use.