Pa. may give 'smart' electrical power a try

Every few days this summer, Patrick Hennelly has posted something new on his kitchen refrigerator. But he isn't sharing the usual school schedules, family pictures, or wedding invitations with his wife and 11-year-old son. Hennelly has been posting charts of power prices.

As a manufacturer's rep who sells electrical equipment, Hennelly has an excuse for having power prices on his mind. But that's not the only reason for his obsession.

Several years ago, his Illinois utility offered him an incentive to pay heed: Unlike nearly everyone else in the country, Hennelly does not pay flat-rate prices for each kilowatt-hour his family consumes. He has been paying the actual cost of the power - and liking it.

On the hottest summer afternoons, Hennelly has paid as much as 371/2 cents per kilowatt-hour - five times the year-round average charged by his utility, Commonwealth Edison. Payback comes in off-peak hours, when prices drop as low as a half-cent per kilowatt-hour, less than 3 cents including the fixed rate ComEd charges for delivering the power.

All told, Hennelly figures he has saved 10 percent, or about $200, off his $2,000 annual power bill simply by paying attention and pushing for small changes in his family's behavior.

Hennelly, who lives in the Chicago suburb of Barrington Hills, began as part of a 1,500-customer pilot program. Last year, Illinois required ComEd, a subsidiary of Chicago's Exelon Corp., to make the real-time-pricing program permanent and available to all its customers. Its goal is to sign up 110,000 over the next several years.

If Gov. Rendell gets his way, ComEd's sister company in Philadelphia, Peco Energy, and other Pennsylvania utilities will soon be doing something similar for their customers.

When the Pennsylvania legislature returns to Harrisburg next week for a special session on energy, a key debate will center on Rendell's proposal to require utilities to begin offering real-time pricing to Pennsylvania consumers and businesses and to require that they install high-tech meters so customers can control their use as prices climb.

Rendell says letting electricity users see and respond to the cost of power is the key to cutting consumption during peak-demand periods. Those are the periods, perhaps 100 hours a year, when the region's power prices can soar to 10 or 20 times the average price - costs that utilities must cover when they set flat, year-round rates.

Rendell says managing peak demand is crucial for Pennsylvania to avoid the steep jumps in power prices, as other states have experienced, when 1990s price caps affecting most of the state expire in 2009 and 2010. Peco's current prediction is that its average rate will rise 15 percent to 20 percent in 2011, when the caps are gone, though the utility said Friday that it would phase in any rate increase over several years.

Peco and most of its counterparts have resisted Rendell's "smart meter" proposals, particularly a requirement that advanced meters be installed in all customers' homes and businesses within six years.

"We're not opposed to smart meters," said Peco spokeswoman Mary Rucci. "It's important to conserve - we certainly support demand-side management. But we have to be very aware how customers would react to it and what the costs would be."

Some of the argument centers on just how smart a smart meter needs to be.

Rucci said Peco's current meters would allow real-time pricing with a $40 million upgrade. But she said the utility's cost would rise to $300 million, nearly $200 per customer, if it were required to install a higher-tech meter capable, for instance, of ratcheting back a home's air-conditioning when power prices soar on a hot summer day.

On Friday, Rucci said Peco was willing to install the high-tech meters throughout its system over "a six- to 10-year period," beginning soon with a program that would make them available to "a couple thousand customers."

Rendell administration officials said they expected some resistance from the state's utilities, since almost all are part of companies, such as Exelon, that also own power plants. Anything that cuts demand and reduces peak prices hurts generators' revenue.

"Their objective is to derive as much income out of their power plants as possible. And that means selling as much electricity as they can and at the highest possible price," said Kathleen McGinty, secretary of the Department of Environmental Protection.

ComEd's experience in the Chicago area, with a meter that costs the utility $140 apiece, suggests that motivated customers can learn to respond to power prices, much as cell-phone users have learned to shift optional calls to off-peak hours.

Program participants such as Hennelly cannot read up-to-the-minute power prices off their meters, nor can they rely on the meter to ramp down their power consumption. But they don't have to.

Instead, ComEd's contractor for the program, Comverge Inc., makes pricing information available online, through a Web site called www.thewattspot.com, the source of Hennelly's refrigerator charts. For customers who want the no-brainer approach, Comverge will use radio controls to temporarily cut back their homes' air-conditioning when prices rise past a predetermined level.

So far, the Hennellys have opted to make their own adjustments.

Hennelly said the family uses timer controls to wash dishes and laundry early in the morning, when prices are lowest - a double benefit because the Hennellys also rely on an electric pump to direct well water to their appliances.

And the Hennellys use a clock thermostat, though in a way many might find counterintuitive: In the summer months, it ramps up their home's air-conditioning after midnight, when power prices are lowest, cooling it to 70 degrees. During the day, it allows the temperature to rise to 76 or 77.

Hennelly has even experimented - so far unsuccessfully - with another ComEd pilot offering: online control of his home's thermostat, so he could bump the temperature even higher if occasional conditions warranted it. "They haven't gotten the bugs out yet," he said.

Comverge vice president Bud Vos said he expected most customers to prefer the automated approach, which it calls Load Guard.

The slogan is "Set it and forget it." Customers can choose the "Green Level," which begins cycling their air conditioners on and off when power prices hit 10 cents per kilowatt-hour, or the "Blue Level," which sets the trigger at 14 cents.

Comverge and ComEd tout the environmental benefits of the Green Level, which Comverge says is the price at which power-grid operators start to turn to rarely used "peaker" plants that emit more pollutants and greenhouse gases. It says the Blue Level is for those who "prefer a cooler indoor temperature, but still want protection against extreme energy prices." At either level, customers can opt out online the day before if, say, they expect a crowd for a party or meeting.

How much do the automated customers save? Comverge says only that "significant savings" are possible, but that they depend on a customer's willingness to limit air-conditioning on the hottest weekday afternoons.

ComEd itself offers one guaranteed savings: a $20 or $40 annual rebate for customers who agree to have the remote controls on their air conditioning, with the higher amount going to those willing to allow the utility to cycle their air conditioners off for a longer period.

The rebates are possible because of a peculiar feature of electricity markets: Because it lowers the cost of delivering power to all customers during peak-use periods, demand-response does not just cut the amount of power a utility must sell at a loss. It can also lower the cost of all power sold in periods of peak demand, saving a utility significant amounts of money.

See two animations about the "smart meter" at

http://go.philly.com/SmartMeterEndText