Maine clean energy advocates say it’s time to revisit and ramp up time-of-use rates, and the state’s major utilities and several other stakeholders agree.
Meeting the state’s climate goals could add significant load to the state’s grid as drivers switch to electric cars and buildings abandon fossil fuels for heating.
Unless some customers can be persuaded to put off drying clothes, running dishwashers or charging vehicles until nighttime, that new demand could force expensive upgrades to the system and make it harder to eliminate fossil fuels.
That’s where time-of-use rates come into play. Unlike traditional flat rates, time-of-use rates charge customers different prices at different times of the day. Often this means customers pay a relatively expensive rate during the busiest hours of the day and less expensive rates during off-peak hours.
State legislation introduced this year, as well as a recent report on the future of Maine’s electric grid, called on state regulators to investigate how to roll out time-of-use rates on a broader scale than what’s currently offered.
“We’ve been, in Maine, interested in convening a conversation around grid modernization for a while,” said Rob Wood, director of government relations and climate policy for the Maine chapter of the Nature Conservancy, which convened a stakeholder group last September to build on the recommendations of an energy-focused working group within the Maine Climate Council.
The 35-member group, which the Nature Conservancy convened in partnership with the Great Plains Institute, included renewable energy developers, clean energy and consumer advocates, state government officials and representatives from both of Maine’s investor-owned utilities. Its final report, issued in April, included nine broad recommendations to advance the state’s grid modernization efforts. (The report received funding from the Barr Foundation, which also provides funding to the Energy News Network.)
One of the recommendations was for the state to adopt dynamic rate designs to improve the grid’s flexibility. As a first step, the report said, Maine’s Public Utilities Commission “should immediately look more closely at time of use rates and/or other dynamic rate structures that more accurately reflect the cost of producing and delivering power.”
A time-of-use rate needs to be structured so it actually encourages customers to shift their electricity use off-peak, said David Littell, a former Maine utilities commissioner who was part of the stakeholder group.
That requires establishing a sufficient difference between what customers are charged off-peak and on-peak, he said. The peak window also has to be reasonably timed: He found in previous research that, based on hundreds of rate pilots and operational rates, customers were more likely to sign up for time-varying rates when the peak windows were only three hours, as opposed to eight to 14 hours.
Littell and others in the stakeholder report also said time-of-use rates should include all aspects of customers’ bills, including supply and capacity.
“Most of what I’m seeing across the country right now is that if a utility is talking about doing a time-of-use rate, they prefer to start with the supply cost,” he said. That’s something utilities can easily do themselves, structuring the rate based on what it costs to deliver energy to customers.
Capacity would be harder, since utilities don’t have jurisdiction over the line items on customers’ bills for the energy itself. In deregulated utility markets like Maine, the energy is provided by suppliers separate from utilities, at a rate called the standard offer. Suppliers would have to implement their own time-of-use rates. But without making it mandatory for them to do that — something the commission could do — they’re not likely to take that path, Littell said, since it’s far easier to stick with the status quo.
In a small market like Maine, suppliers have less incentive to pursue the education and effort necessary to change their rate design without the guarantee that they’ll make money on it. “If it’s not mandated, it’s not going to happen at the standard offer level, full stop,” said Tom Welch, a former Maine utilities commission chair who also contributed to the recent grid modernization report.
Protections will also be necessary for low-income customers who end up paying more under the new rate than they currently pay, but Welch said that’s easily addressed, for example, with refunds for groups of customers that are unable to respond to the price signals.
Jeff Marks, the Maine director at Acadia Center and a stakeholder group member, said a time-of-use rate should include an opt-out option. On the one hand, this option adds a layer of protection for customers who often have limited means and schedules that don’t allow flexibility to change their electricity use. At the same time, automatically enrolling all customers and allowing them to opt out if they choose almost certainly guarantees higher uptake than trying to get customers to sign up on their own.
This appears to have been the case in Connecticut, where United Illuminating implemented a mandatory time-of-use rate in 2006 for residential customers with high electricity usage. It’s no longer mandatory, as per a request to regulators from the utility citing low popularity among customers. Still, a report published last fall, co-authored by Littell, found that about 35% of the utility’s roughly 206,000 customers were still enrolled as of 2018.
By comparison, an optional rate rolled out by Central Maine Power was found in the same report to have virtually no participation among the utility’s roughly 486,000 customers. Several other optional time-varying rates around New England showed similarly low participation, indicating the rate customers are automatically enrolled in has significant bearing on participation, Littell said. (Central Maine Power reported to the Energy News Network that currently, about 5,000 of its roughly 520,000 residential customers have signed up for its time-of-use rate.)
“I think those recommendations around rate design are something we’re open to and interested in,” said Jason Rauch, a policy manager at Central Maine Power, referring to the stakeholder report. He added that while he thinks a time-of-use rate would need to encompass delivery as well as supply to benefit customers, “we think there could be improvements in our delivery time-of-use rates.” That includes improved peak window timing to better reflect actual system peaks.
Versant Power, Maine’s other large regulated electric utility, “support[s] the recommendations that will help Maine decarbonize at the lowest cost to customers,” Marissa Minor, a Versant spokesperson, wrote in an email referring to the stakeholder report.
“The current time-of-use rate offerings in place are limited and were instated decades ago,” Minor said. “Versant Power is currently investing in our metering systems and will be installing new advanced metering equipment for all residential and small commercial customers over the next several years. These meter investments, along with system upgrades, are necessary for supporting future dynamic pricing programs.”
The stakeholder group convened by the Nature Conservancy said electric vehicles could be a good place to begin trying out a time-of-use rate. As more electric cars come on the road, incentivizing customers to charge later in the day and overnight will help reduce stress on the grid in the afternoon, when people often arrive home from work and electricity use spikes.
Also, new charging technology makes it possible for drivers to pay for electricity on a time-of-use rate for their car without having to install a separate electric meter for their charger or put their entire household on the new electric rate.
Getting the model right could be the difference in making sure the shift to electric transportation and heating actually reduces emissions on the scale hoped for and doesn’t trigger an expensive and potentially polluting build-out of new fossil fuel power infrastructure.
“I think many of the grid modernization and customer benefits that [electric vehicles] and heat pumps provide really can’t be realized without the use of time-varying rates,” said Marks, of the Acadia Center.
Some recent legislative action could push the state toward adopting time-varying rates. One bill related to energy storage would direct the commission to investigate time-of-use rates and test their use with storage. Another bill would direct regulators to solicit new utility rates “to promote the installation and operation of electric vehicle charging stations.” But Welch and Littell said the commission doesn’t need legislative direction and could begin moving forward on time-of-use rates now.