The Dynamic Pricing Mousetrap: Why Isn't the World Beating Down Our Door?

In the smart grid debate, a key consumer oriented benefit has been the potential of dynamic rates. Properly implemented dynamic rates can reduce costs for consumers and provide them with valuable information about their energy usage in ways that enable them to reduce consumption, particularly at peak times when the electric gird is most stressed. Seven years of experience with thousands of residential real-time pricing customers in Illinois has supported this theory. Participants in the Ameren Illinois Utilities’ Power Smart Pricing and ComEd’s EnergySmart Pricing Plan SM and the later Residential Real-Time Pricing programs have been successful in reducing peak demand in the 15% range and achieving bill savings that averaged in the 10 to 15% range. Recent evaluations have shown a conservation effect of reduced kWh at the level of 6% in the summer and 1.5% annually. Surveys have found that participants find it easy to manage their energy use and have high levels of satisfaction. These findings span race, income, usage and community demographics. But if it’s such a great idea, why have only a small percentage of customers signed up? This paper will explore the challenges and learnings from marketing a new voluntary rate that tries to undo 100 years of public policy that separated consumer electric rates from the real costs of generation.