Senior Airman Stephen G. Eigel / U.S. Air Force
A recent survey suggests customers are open to alternative rates, and many think they already participate in them.
As utilities consider time-of-use rates as a tool to help manage the grid, a recent survey suggests customer education could be a barrier to rolling out successful programs.
The survey by the Smart Energy Consumer Collaborative suggests many people don’t fully understand how their electric bills work.
“There is a widespread lack of awareness, and I think it’s because you can’t take your electric bill and look at it and understand it easily,” said Patty Durand, SECC’s president and CEO. “They’ve never been consumer-friendly documents.”
That could be a challenge as utilities introduce more complicated rate structures that charge different prices at different times of day.
One bright spot from the survey: Most customers said they are open to trying time-of-use rates, especially if they offered potential to save money.
Meanwhile, a separate report suggested electric vehicle drivers, in particular, are primed to engage with utilities on alternative rate structures.
The Smart Energy Consumer Collaborative surveyed 1,138 residential customers for their opinions on common alternative rate structures such as time-of-use. Forty-seven percent said they weren’t sure what their current electric rate plan was — a traditional flat rate or an alternative plan. The survey also found that 14% said they had an alternative rate, even though federal data reviewed by SECC showed only 5% of the country’s customers participate in those types of rate programs.
Durand said one of the key takeaways here, as is often the case in SECC’s research, is that utilities and other stakeholders need to focus on customer education. Still, she was pleased to see most customers are willing to try an alternative rate plan, especially if it has certain benefits, and as long as it doesn’t come with added charges.
Up to 62% of residential customers would prefer an alternative rate plan over a standard rate if it were structured a certain way. For one, customers preferred a two-tiered time-of-use rate: two flat rates for an off-peak time period and an on-peak time period (as opposed to breaking the day into more time windows).
Beyond that, customers said they wanted the plan to be free of added fees like green power premiums, which charge more for electricity associated with renewable resources, and demand charges, which charge fees based on a customer’s peak use each month. Customers would prefer their electricity be associated with a solar power source, and they’d be incentivized with a $50 bill credit as a sign-on bonus to join the plan.
“I thought it was confirmation of things that we have been talking about for a while,” Christie Hicks, a senior attorney and manager of clean energy regulatory implementation at the Environmental Defense Fund, said of the report. Specifically, she said, a lot of customers could benefit from alternative rates, but “there is just not nearly enough public awareness of them.”
Part of the reason for that lack of awareness is that few alternative rate options actually exist, Hicks said. The first step toward raising awareness is for regulators to approve more alternative plans (as long as they find them reasonably structured) and “then it’s up to the utilities, regulators … to make customers aware as much as we can that there is this other rate plan available.”
To reach customers more effectively, it’s important utilities know their customers and communicate how new rate structures can benefit them specifically, said Rachel Gold, senior manager of the utilities program at the American Council for an Energy-Efficient Economy.
With usage data, especially the more time-specific data from smart meters, utilities can often determine from an individual customer’s electricity use patterns how they would fare on an alternative rate. They can show that information to the customer on their bill, a strategy known as shadow billing. “I think that’s one of the best tools that utilities have, because it gives [customers] the information based on their usage,” Gold said.
Survey respondents also indicated they’d be more willing to participate in an alternative rate plan if their technology could automatically shift electricity use to off-peak times. Energy efficient devices like smart thermostats are one increasingly popular way to do this, and household appliances can often be set to delay their start times. Pairing automated technology with customer education on the value of off-peak electricity use will help customers understand why this is important while also allowing them to save money more easily, Gold said.
The electric vehicle case
Interest in alternative electric rates is ramping up at the same time electric vehicle ownership is growing. According to another new report, time-dependent rates are especially useful to balance added grid load from those cars, and many drivers said they’re open to trying them.
These conclusions aren’t necessarily new: Environmental and consumer advocates have long supported implementing alternative rates to encourage drivers to charge off-peak. But experts said they were pleased to see that information backed up with data.
The report by the Smart Electric Power Alliance documented 50 U.S. utilities and electric cooperatives that offered, as of September, some kind of alternative electric rate for drivers of electric vehicles, including pilots and fully implemented programs. Most were time-of-use rates, although a few utilities offered bill credits for off-peak charging, and one offered a subscription rate where customers paid a fixed monthly amount for unlimited electricity consumption during specific time frames.
More than half of the 64 rates SEPA documented applied to the driver’s entire household, and in 21 cases they only applied to the car. Some allowed the driver to choose between a whole house rate or one for just their car.
“There’s no one-size-fits-all option,” said Erika Myers, a transportation electrification principal at SEPA and one of the report’s authors. “It is very much utility-by-utility specific, and so what we hope to do with this research is at least provide a large number of options to consider.”
The customer survey was conducted by SEPA and Enel X, a charging provider, and included almost 3,000 customers of Enel X’s JuiceNet charging platform. (The report acknowledged this sample might not reflect all customers.) Many of those customers live in California, where data shows almost half of the country’s electric cars were sold last year — plus California’s major utilities are on their way to default time-of-use rates for all customers — so the report also breaks responses into California and non-California segments.
More than 60% of respondents said their utility offers a time-of-use rate, and only about 10% weren’t sure. Eighty-seven percent of the customers who were enrolled in time-of-use rates said they shift their charging to off-peak hours at least 95% of the time. There was little difference in charging behavior between customers enrolled in whole house versus electric vehicle-only rates.
Based on utility responses from the same report, researchers said three main factors are driving customer enrollment: First, rates have to provide customers an opportunity to save money. Second, they have to be promoted through dedicated marketing efforts, when customers are most engaged; that means when they’re purchasing a vehicle or charger, rather than waiting.
And finally, customers are more likely to enroll when they don’t have to pay extra fees for metering. This is a concern for many utility officials considering implementing rates specifically for cars. Those rates often include separate electric meters or submeters for the car, which can drive up customer costs.
“We’re supportive of time-of-use rates because we think it’s the best way to get the right motivation and preserve the grid,” said Mark Nabong, a senior attorney and transportation specialist at the Natural Resources Defense Council. He said these rates, particularly when customers are automatically enrolled with the option to opt out, are “a great way to put the consumer incentives in line with the consumer benefits.”
The incentive has to be big enough, though, he said: Generally, the savings a customer gets from charging off-peak have to be two to three times what they might save if they charged during peak hours. SEPA reported peak-to-off-peak price ratios as little as 1.2 to 1 and as high as 15.5 to 1.
Nabong added that NRDC generally supports rates that apply to the whole home rather than just the car. “You want to incentivize folks to use their power off-peak, whether that’s charging their car or drying their clothes,” he said. But he said it’s possible separate electric vehicle rates, with a separate meter or submeter, can benefit some customers. SEPA’s report points out that customers who work outside the home may find it easier to shift their whole household’s electricity use off-peak during the day, whereas those who work from home may be better served by a separately metered vehicle-specific rate.
Enrolling in a car-specific rate may also give customers a chance to experiment with a time-of-use or other time-varying rate and get them on board to enroll their entire house in the future, said Samantha Houston, an analyst at the Union of Concerned Scientists who specializes in electrified transportation.
Current programs, both pilots and utility-wide offerings, should continue to serve as data sources that utilities and researchers can share with each other to guide future initiatives, she said. Broader-reaching research — for example, a customer survey that includes respondents across more than just a single charging network — will also help gather solid data.
At the same time, some pilots have gathered enough data to show their potential, and those utilities can begin scaling up, Houston said. Administrators at Xcel Energy in Minnesota, for example, have proposed scaling up an electric vehicle pilot that uses charger data to measure electricity use rather than a separate meter.
Houston also pointed out that utilities and advocates often emphasize the importance of off-peak charging because it relieves grid load, but she said it’s not just about avoiding negative consequences. Cars can serve as distributed resources, actively shifting charging load through programs like demand response, or sending energy back to the grid, she said.
But “EVs can still benefit the grid even through passive measures” like charging off-peak, Houston said. By leveling out demand on the grid, for example, off-peak charging can decrease electricity and service charges on customers’ bills across the entire utility territory. And as renewable generation grows, utilities can incentivize drivers to charge at times of surplus renewable energy, making the cars an even cleaner resource.