Continued Coverage from Danville Article

One of the blogs that we have followed on the blog roll called Knowledge Problem wrote up a quick summary of the Danville article. In following the comments we decided to address some of the missing gaps of information and expand further on the benefits of our variable pricing program.

Here was are response:

I should say upfront that I am one of administrators of the Power Smart Pricing program. I am also a daily reader of KP. Great work.

As far as savings are concerned, the average savings for our entire customer base is 13% since the beginning of the program in Jan 2007. Over time the savings levels has fluctuated as power prices change, but we’ve had a very good run lately. In 2009 with the wholesale market price for electricity being so low, the average savings for customers has jumped to 27%. Ameren’s flat rates went down a bit in June which has cut into those savings a bit during the summer but since summer power prices haven’t increased as much as in past summers, the numbers continue to look really good. Not paying a risk premium for a flat rate is what’s making the program attractive to customers.

We hear your concerns about the participation fee and do agree is one disincentive to participation. The history of the fee is that the legislation that enabled this program required utilities to spread the costs of it between participants and residential non-participants. Since Ameren doesn’t yet have smart meters, there was a need to figure out how to pay for the interval recording meters that get installed for participants on the program as well as the program administration costs. Absent this program, Ameren charges $5 a month for this type of meter. The $2.25 fee was a negotiated reduction with the rest of the costs being spread out across the residential rate base via a rider (currently about 6 cents a month). Long term we hope that the cost of meters gets dealt with in different ways as AMI/Smart metering plans get determined. If it were a common cost, the incremental cost of this program would be substantially lower

With the mention of fuel pricing, we have unbundled utilities in Illinois that don’t own their own generation but rather procure power for flat rate customers via the Illinois Power Agency (and some legacy contracts from our ill-fated reverse auction). Therefore the fuel price risk isn’t really a factor or concern to the utility.

We also do like automation to help customers, but it of course comes at a price. We’ve been really proud of what our participants do without automation, they have a good elasticity of demand to price. (see: http://www.cntenergy.org/real-time-electricity-pricing.php for the evaluation reports) We are working in areas where internet usage isn’t that high

Our organization is definitely one that centers on environmental policy, but this program has really proven to attract all types of customers. Most are looking to save some money and are not that concerned with energy consumption or its environmental impacts. In fact, most of our customers don’t even use computers on a regular basis. Automation would help to a degree, but our customers have shown that simple price signals have been able to work on their own. See the evaluation reports at: http://www.cntenergy.org/real-time-electricity-pricing.php. Our participants don’t think of themselves as advanced or cutting edge. It’s simply people realizing that variable pricing is a better option for them.

I write our blog over at http://www.powersmartpricing.blogspot.com. Come over and check it out if you want to follow our program a little more. For example, we are particularly excited about our new use of twitter to broadcast prices.

Check out the original Knowledge Problem post here.

And.. the follow up.