It may be the easiest money you can earn without breaking much of a sweat.

Peco Energy Co. says 68,000 residential customers have signed up to receive $120 annual bonuses for allowing the utility to cycle their home air conditioners on and off during the hottest summer afternoons.

The program, which the Philadelphia utility calls its Smart A/C Saver, is designed to reduce demand on the regional electricity grid during peak hours, when the transmission system is stressed.

Customers who enroll in the program permit Peco to install radio devices on their air conditioners that allow the utility to shut the units off for up to 15 minutes every half hour during "conservation events."

Peco maintains that most customers will not experience discomfort from the slight increase in temperature because their air-conditioning systems will still operate, just not as intensely.

The system was tested at the homes of some Peco workers. "Most of our employees tested couldn't tell the difference," said Cathy Engel Menendez, the utility's spokeswoman.

A more critical audience - Peco's regular customers - will get its first opportunity to experience the system this summer, she said.

Although Peco installed more than 10,000 devices last year and paid the promised $120 credits, it has not yet actually declared a conservation event and reduced power to its customers.

"Last year, we were really in a customer-acquisition phase," said Engel Menendez. "You get the credit whether we declare a conservation event or not."

She said the utility hoped to sign up at least 100,000 customers eventually, to reduce peak demand sufficiently to meet state-mandated energy-conservation targets.

The state's 2008 conservation law, Act 129, requires utilities to reduce consumption 3 percent by 2013 or face penalties. It also requires utilities to reduce demand for electricity by 4.5 percent on days when the regional electrical grid is most congested.

The Pennsylvania Public Utility Commission has allowed Peco to spend $342 million over four years to cover the conservation costs, which includes discounts on energy-saving appliances and lighting. Peco can recover the costs by raising rates up to 2 percent.

Besides the penalties utilities face for failing to meet the targets, the regional grid operator, PJM Interconnection L.L.C., offers a powerful incentive to utilities and its biggest customers to reduce peak demand.

The wholesale price of power typically increases during peak periods, when the grid calls on more expensive power plants to come on line. On the hottest days, prices can increase dramatically.

Last Wednesday, when the Philadelphia temperature topped out at 96 degrees, the spot-market price of power ranged from $28 a megawatt-hour at 4 a.m. to $348 a megawatt-hour at 5 p.m. (A megawatt-hour is a thousand kilowatt-hours.)

Large customers that can reduce demand during peak hours - the practice is called "demand response" - get paid the same price as power generators. So on days when peak power costs $348 a megawatt-hour - that's 35 cents a kilowatt-hour - conservation pays handsomely.

Conversely, on mild summer days like Monday, the peak price never got above $37 a megawatt-hour.

By managing the power consumption of tens of thousands of residential air-conditioning customers, Peco can reap big rewards on the grid, which helps pay for the $120 credits.

How cycling works

Peco installs a radio device on a customer's air conditioner that allows the utility to shut off power to the unit for up to 15 minutes every half hour during "conservation events."

The combined effect of tens of thousands of air conditioners cycling off reduces stress on the grid.

Peco says comfort levels are barely affected.

Participants are paid a $120 annual bonus.

EndText

Contact staff writer Andrew Maykuth at 215-854-2947 or amaykuth@phillynews.com.