Friday, August 1, 2014

Nothing new under the sun?

By Patty Durand, executive director, Smart Grid Consumer Collaborative

I confess I didn’t learn much new about consumer advocates’ perspective on smart grid technology investments in our Peer Connect webinar series, “Conversations with Consumer Advocates.”

Fully four years after consumer issues were publicly recognized as a critical industry concern in smart grid investments, it puzzles me that these advocates didn’t address the demand response conundrum at the heart of the matter: if consumer protections are reasonable and straightforward, and utilities need only a portion of their customer base to participate in dynamic pricing and related programs to defer wasteful investments in standby capacity to meet peak demand, why aren’t these solutions taking place?

I don’t lay the responsibility for the continuing impasse at the feet of either party, nor am I criticizing our respected panelists. Perhaps the culprit is inertia – the tendency to stay at rest or continue on a pre-existing trajectory unless impacted by an outside force. Perhaps that outside force will be regulators, who could facilitate accommodation between utilities and consumer advocates.

That’s speculation. But we may see this idea tested as the New York Public Service Commission (NYPSC) proceeds to reform its power market paradigm under NYPSC Chair Audrey Zibelman, founder and former CEO of Viridity Energy, Inc., a demand response aggregator. I’ve blogged about this exciting effort, known as “Reforming the Energy Vision,” or REV. (Read my first and second blogs here.)

I believe REV is the first state level proceeding that takes a consumer-centric approach which, among other things, is aimed at reducing or eliminating the $450 million New York spends annually on capital-inefficient, highly polluting, stand-by generation to meet peak demand on only a few days each year. This expensive stand-by generation is often ignored as a concern or relegated to second place by most consumer advocates. All three panelists on our webinar oppose an opt-out approach to time of use pricing programs for fear of harming the less educated or engaged consumer, wanting only an opt-in approach. I understand the desire not to harm low-income or less educated consumers. Yet the expensive waste that is known as load-factor, or stand-by generation needed for peak demand, is never mentioned as an equal concern. These are huge costs born by consumers and quite heavily impact the rate base.

The New York REV proceeding says that consumer participation in utility programs requires products, information and enabling technology. If programs are designed properly, the expectation is that many customers will choose to take an active role in managing their own energy use. An important feature is that customer segmentation will lead to more product and program options that spark consumer interest and will motivate. Confusion and a lack of information creates a disincentive to enroll in demand side management programs, the REV report finds.

Fast forward to our recent panel of consumer advocates, which included Paula Carmody, Maryland People’s Counsel, David Kolata, executive director of Illinois’ Citizens Utility Board, and Ty Slocum, director for energy issues at Public Citizen.

They, too, suggested that, in general, service options, information and enabling technology for consumers are missing from utility-sponsored smart grid programs and investments. They called for sound business plans that share financial and technological risks between consumers and utility shareholders. And they say that time-of-use and/or dynamic pricing programs should remain strictly voluntary and opt-in, rather than opt-out.

Carmody, the lead-off speaker on our panel, added other fundamental consumer concerns established in the regulated monopoly model that must be maintained as we move to a more market-based, smarter grid. The utility ability to remotely disconnect customers for non-payment must not be abused, billing dispute rules must remain in place, consumer education must be funded and its results measured and utilities held accountable for their investments, which means no guaranteed cost recovery until performance metrics are attained. Consumer data security and privacy, particularly around smart meters, has yet to be adequately addressed.

Kolata added that broad stakeholder input is needed to guide utilities embarking on grid modernization for the simple reason that regulated monopolies have little experience with the entrepreneurial aspect of a market-based power paradigm. To be engaged participants, consumers need to see opportunities to take action and get immediate benefits in return, he said.

Slocum said that despite the technology’s promise, too many consumers simply don’t have the consumption patterns or a large enough home to take advantage of the energy management opportunities presented by dynamic pricing. Now is the time to review lessons learned against the early promises made by utilities that smart meter investments would enable bill reductions through energy management actions by consumers, he said.
All three advocates suggested that peak time rebates represent an acceptable “carrot” to modify consumer behavior to benefit utility goals of peak load reduction, load shaping and capital deferral.

Some of these arguments tend to sound a little circular. If consumer advocates resist dynamic pricing except for peak time rebates, how can they complain that options for consumer action to save energy and money are missing? I hoped to hear more about successful compromises or lessons learned regarding how traditional consumer protections could go hand-in-hand with advanced, smart meter-enabled pricing programs.

The repeated mention of broad stakeholder involvement in the development of utility-initiated proposals for grid modernization have echoed for years, seemingly without a resulting shift in each stakeholder’s position. Perhaps New York’s REV effort will illustrate how such a logjam can be broken, to everyone’s benefit.