Moving toward utility-scale deployment of dynamic pricing in mass markets


Washington, DC, U.S.A. — (METERING.COM) — June 15, 2009 – Studies have shown that dynamic pricing can provide numerous benefits to utilities and customers alike by lowering the need for expensive peaking capacity, improving system reliability, and reducing power costs.

With a view to helping facilitate progress toward the deployment of dynamic pricing of electricity in the United States, a White Paper has been published by the Institute for Electric Efficiency (IEE) summarizing information that may assist utilities and regulators who are assessing the business case for advanced metering infrastructure (AMI).

The White Paper, “Moving Toward Utility-Scale Deployment of Dynamic Pricing in Mass Markets” by The Brattle Group principal Ahmad Faruqui and associate Sanem Sergici and IEE executive director Lisa Wood, highlights five dynamic pricing programs that have been implemented in the U.S.

These are:

  • California’s Statewide Pricing Pilot (2003-04)
  • Baltimore Gas and Electric Company’s smart energy pricing pilot (2008)
  • Commonwealth Edison’s Community Energy Cooperative’s Energy-Smart pricing plan (Full-scale rollout)
  • Public Service Electric and Gas Company’s MyPower pricing pilot (2007)
  • Pacific Gas and Electric Company’s SmartRate program (Full-scale rollout).

These five programs show strong adherence to sound experimental design and statistical analysis principles, the authors say, and accordingly they believe the results can be generalized to the larger population of customers in the U.S.

The authors say that the single most important conclusion from then review is that customers do respond to dynamic prices, although the extent of the demand response varies from one program to another, mainly due to the differences in prices. The authors also conclude that enabling technologies such as energy orbs, programmable communicating thermostats (PCTs), and central air conditioning switches significantly increase the customer response to the price signal.

Nevertheless there is no “one size fits all” dynamic pricing structure. Each utility has to determine the dynamic pricing regime that would best fit the characteristics of their system, their customers, and their demand response goals.

Dynamic pricing is pricing based on the time-varying nature of demand and therefore the real cost to serve customers and includes time-of-use and critical peak pricing.

To read the White Paper click here: Moving Toward Utility-Scale Deployment of Dynamic Pricing in Mass Markets

For more about the Institute for Electric Efficiency see