Maine utility launches time-of-use rates

Wednesday, December 12, 2012

A Maine electric utility has launched a program to offer residential consumers rates that vary depending on whether the consumption occurs during times of peak demand on the electric grid.  Central Maine Power Company's residential time-of-use rates are designed to encourage consumers to shift their use of electricity-intensive equipment to off-peak hours, generally between 8:00 p.m. and 7:00 a.m. and on weekends. How many customers will choose this option?  What effects will it have, both for the consumers opting in and for society as a whole?

Traditionally, electric ratepayers pay the same price for every kilowatt-hour of energy they consume, without regard to the time of consumption or to conditions on the grid.  But the cost of producing a given kilowatt-hour of electricity depends on factors including the portfolio of generators operating at the time, as well as on the instantaneous demand for electricity in the overall regional market.  Because they are not directly exposed to the real-time price of power, consumers individually and collectively may not make efficiency choices about how much power they consume, and when they consume it.  For example, energy prices are typically lower at night, when demand is reduced, but consumers have not traditionally had any incentive to shift their consumption to lower-priced nighttime hours.  Some utilities have offered industrial and commercial businesses time-of-use rates to encourage efficiency, but most residential ratepayers have not had this option in recent years.

Central Maine Power now offers residential consumers the option to choose time-of-use rates.  Prices during peak hours will be about 15 percent higher than under the default rate schedule, with off-peak prices about 20 percent below the default rates.  The structure offers the opportunity for consumers to choose to shift heavy-consuming applications like air conditioning and heating to off-peak hours.  This could save these consumers money - but it would require them to modify their behavior, invest in new "smart" technology, or both.  Will consumers find the opportunity for savings to be worth these changes?

The current enrollment window is open through January 31, 2013.

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