Monday, October 20, 2014

Net metering, consumers and utilities: a second look

By Patty Durand, Executive Director, SGCC

I’ve read a good deal of public discussion recently on net metering and the purportedly unfair costs it imposes on the host utility. I hear this position echoed in personal conversations with many industry participants. Perhaps you have as well.

The arguments posited by a variety of utility-leaning parties might be summarized as follows:

When a utility pays retail or near-retail prices for power injected onto the grid by customers with distributed energy resources (DER), that payment amounts to a “subsidy” for those customers or the energy service companies that lease the DER to them. The reason given: the customer’s payment exceeds the utility’s avoided energy cost.

The spread of DER cuts into the amount of energy sold by the utility, the argument goes, and that reduces utility revenue, while the cost of maintaining the grid for all remains the same. Thus, affluent customers who can afford DER – say, solar photovoltaic panels on their home – get a break (the “subsidy”) while less affluent customers shoulder a greater burden to keep the system running.

And if the customer in question, say, leases solar PV from an energy service company, then the so-called “subsidy” flows to that third party, which is an unintended consequence of flawed policy.

These arguments conclude that utilities are treated unfairly by net metering policies and remedies are needed, and swiftly.  

As far as I can tell, these arguments have produced a disturbingly homogenous response: most industry people I speak to appear to accept these arguments at face value. And, at face value, they make sense to me as well. But because the arguments put forth so far have been utility-centric, I’d like to make a few points on behalf of a more well-rounded, long-term view that reflects the interests of all stakeholders.

After all, this blog appears courtesy of the Smart Grid Consumer Collaborative. Consumers indeed have advocates at the public utility commissions, but they tend to be devoted to traditional consumer protections. Net metering is an issue that will morph as utility grids get smarter, more DER is implemented and utility business models shift to accommodate new realities. So “getting it right” may require mid-course adjustments as we move forward.

Yet my points aren’t necessarily consumer-centric. Rather, I’d like to call attention to points being made on behalf of a 360-degree devotion to fairness and transparency for all stakeholders, including utilities and their customers, regarding net metering issues.

The well-regarded Regulatory Assistance Project (RAP) issued a position paper last fall titled, “Designing Distributed Generation Tariffs Well: Fair Compensation in a Time of Transition.” I find that RAP’s dispassionate approach goes the extra mile to be fair to utilities – and all other stakeholders as well. The points RAP makes are that at times net-metering policies can be unfair, and at other times net metering’s value to the grid exceeds the cost.  Each case must be evaluated separately and best practices for evaluating services to the grid must be used.

RAP recognizes that customer’s role will expand as technology – for instance, DER, storage and controls that create transactive energy markets – further empowers customers at grid’s edge.

Here are two central statements in RAP’s paper that are critical to a discussion of net metering:

“There is tremendous uncertainty regarding how and when we will collectively learn how to take advantage of the tremendous opportunities that technology offers. In short, we are in a time of transition where we can see the two-way and multi-party transactive future but we still live with legacy infrastructure and legacy institutions…

“The regulator’s challenge in this time of transition is to support policies that use the legacy systems wisely while nurturing the evolution of the systems that will facilitate the transition to a far more efficient, environmentally benign, transactive electricity sector.”

In my view, these statements embody an objective approach to the subject. We’ll take a closer look at a few of RAP’s specific recommendations to regulators in my next blog.  

Monday, October 6, 2014

New Innovations in Consumer Engagement

By Patty Durand, Executive Director, SGCC

SGCC’s growing body of research has illuminated the attributes and motivations of the general consumer the power industry seeks to engage.  And you may have read my recent blog, “Entergy engages low-income customers,” in which Entergy’s determination to reach their low income consumers resulted in a stunning enrollment of 4,700 low income customers.

How did they do it? Entergy New Orleans, Inc. (ENO) worked with local community groups to expand its outreach and used every conceivable means to engage low-income customers. Enrollees could select high-touch, face-to-face training, medium-touch phone training or low-touch training by mail. Online tutorials and a dedicated call center were available throughout the project for customer support. The“SmartView” AMI pilot project engaged and empowered low
income consumers to use AMI technologies to better manage their energy use and reduce their energy bills.

So last week’s SGCC Peer Connect webinar for our members, “New Innovations in Consumer Engagement,” simply reminded me that other approaches – one regulatory, the other market based – also are being actively pursued.

Our two webinar guests included Kristin Ralff Douglas, senior consultant in the policy and planning division of the California Public Utilities Commission (CPUC), and Marie Bahl McKenna, senior vice president of sales and marketing at Tendril.

As Douglas pointed out at the outset, “opportunities” might have been a better webinar title than “innovations,” and that’s fair enough, given my point about Entergy’s work with low-income consumers. Engaging consumers is not only available with magical apps, expensive software and new hardware. It can also be people talking to people about wise energy use and the intersection between what’s good for the individual and advancing the common good.

Douglas also acknowledged that “technology is driving policy.” As consumers are empowered by technology such as more efficient solar panels at falling price points, the grid and how it operates is changing.  As we’ll see in my next blog, the regulatory framework for utilities, customers and other stakeholders must change to ensure that the value of every contribution is part of the new equation.  In fact, when you combine abundant sunshine and the increasingly attractive economics of distributed generation it’s not surprising that California keeps popping up in the conversation. Douglas devoted her webinar presentation to California’s Assembly Bill 327, which she characterized as “the key to increased customer engagement.”

According to Douglas, AB 327 is multi-faceted, with two parts directly related to consumer engagement. One is
Rate Redesign Rules (R1206013), the other is Distribution System Planning (R1408013).

Douglas mentioned that opportunities created by the proceedings includes the elimination of tiered pricing and the ability to implement time-of-use (TOU) rates. These rate redesign opportunities increase these likely outcomes: 

  • Increased marketing and outreach to educate customers,
  • More customers on TOU rates.
  • More customers paying attention to their bills.

When you increase consumer outreach and education, and when consumers are offered TOU rates that incentivize behavior changes, you produce greater levels of consumer engagement. The goal is that consumer engagement should benefit the individual as well as the common good through system efficiencies, lower carbon emissions and greater fairness and transparency.

Do utilities have to wrestle with consumer engagement solutions on their own? That’s where Tendril’s McKenna and her presentation fit into the bigger picture. Tendril’s premise is that data-driven, consumer engagement platforms like Tendril’s enable utilities to provide service options tailored to each customer’s preferences which enhances consumer engagement opportunities.

I liked what McKenna said when she mentioned that “engagement” is desirable, but not the holy grail. Timely, relevant value for the consumer is the ultimate goal. And that means “markets of one” and personalized services for every customer that companies such as Tendril can provide through a host utility by crunching energy use data from a customer’s interval meter. As McKenna noted, the “21st century customer” will expect valuable service options tailored to their individual needs.

Personally, I’d add that “engagement” is a step towards motivating new customer energy behaviors that have the potential to meet utility challenges such as peak loads and greater energy efficiency. And Tendril’s work clearly shows that crunching big data can contribute to tailored service options, new customer behaviors and the resolution of current grid limitations.

My takeaway? Utilities now have a deep and diverse toolkit to inform their consumer engagement efforts. From regulatory reform to technology innovation to simple elbow grease, the means are at hand. Let’s see them put to wider use.