Time-of-Use (TOU) Electric Bill: Good Concept, Poor Execution.

Household electric power is a great convenience of modern living and a triumph of engineering. Most people living in first-world countries are so used to having power whenever we want it, we only think about the work behind the scenes when there’s a power failure. Most of the electricity generated is immediately consumed. So when consumption changes throughout the day, generation has to be kept in sync. This balance act is ongoing at all hours of the day, every day, and most of us don’t have to think about it.

One detail of this balancing act is the increasing cost of power as demand rises. Obviously the power company would like to keep their cost as low as possible, so the power plants that are the cheapest to run (base load power stations) run constantly. As demand outstrips the ability of the base load stations, they begin generating power via increasingly more expensive means. These peaking power plants are usually cheaper to build but more expensive to run so they are only used to handle peaks in demand.

Residential electric bills are typically insulated from this change. The standard home electric meters simply record the running tally so the homeowner is billed on the total amount of electricity consumed. With the introduction of more sophisticated meters, it becomes feasible to track energy usage in more detail which makes it possible to bill based on time of use. (TOU)

TOU rates correlate cost of consumption to cost of generation. This gives the consumer a financial incentive to be more energy-efficient. If enough energy usage is shifted around, the consumer can save money. Over a year ago, the local electric utility sent out an invitation to join a TOU pilot study. It would be an interesting experience to see that theory put into practice so the invitation was accepted.

The TOU rates were listed on the bill, where the peak hour rates are indeed appropriately expensive, roughly triple the non-TOU rate. But the off-peak rates were tremendously disappointing: only a 20% discount off the non-TOU rate. A 300% penalty for on-peak vs. 20% discount off-peak means it’ll be difficult to actually save overall money under this plan.

But the study was on and it’s time to put in the best effort. The most significant changes came from running the laundry machines and the dishwasher during off-peak hours as much as possible. On some days this was a severe inconvenience. The effort continued but the consumer was not always happy about it.

At the end of the one-year study, they mailed out a TOU cost summary. They took the year’s electric use and computed it two ways: Once through the TOU pilot study rate, and again on the non-TOU rate.

The reward for ecological awareness? The windfall for severe inconvenience?

SCE TOU Unimpressed

$1.93 over the entire year.

From the perspective of encouraging people to save, this was a complete failure. The utility needs to discount the off-peak rate much more significantly than they did during this study before people would see enough savings to be worth the inconvenience. The kind of time and effort expended during this year was not remotely worth saving $1.93.

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