Internet Explorer 11 is not supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

Can Surge Pricing Cut Energy Use at Home?

California will be the first state where utilities charge more for power used during peak hours.

energy-home-lamp-power-lights
(Shutterstock)
Each day, energy use in California peaks exactly when you’d expect it to -- in the late afternoon, when people are coming home from work, cranking up their air conditioning, making dinner, watching TV and doing household chores. 

But generating power during those hours is both costly and wasteful. “To meet peak demand, utilities have to turn on more generators, and the generators they turn on last are the least efficient and most polluting,” says Edward Randolph, deputy executive director for energy and climate policy at the California Public Utilities Commission (CPUC).

That’s why CPUC is moving to “time-of-use rates” -- akin to “surge pricing” on Uber -- which charge customers more between 4 p.m. and 9 p.m. on weeknights, with the goal of shifting their use to off-peak periods. The Sacramento Municipal Utility District successfully piloted this approach between 2012 and 2014, and San Diego Gas & Electric began switching customers to the new model in March. Southern California Edison and Pacific Gas & Electric plan to follow their lead by 2020. 

Beia Spiller, an economist with the Environmental Defense Fund, says California’s plan will “reduce costs and emissions,” noting that recently improved technology like smart meters helps to facilitate the transition. But she stresses that this kind of change requires robust public education if residents are going to understand the new pricing and adjust their behavior.

Critics worry the new system will be confusing and expensive for low-income, elderly and disabled Californians. Stateline reported that California utilities have exempted 4 million customers “who are enrolled in programs that provide bill assistance to low-income people and those reliant on medical devices.”

But Randolph says he’s confident customers can adapt. “The idea is nothing novel,” he says. “If folks remember back to the early days of cellphone usage and the early days of telephone usage, it was cheaper to make a phone call in the evening than the middle of the day. We understood that, if we could make a call to family in the evening, that was the better time to do it.”

California is the first place to roll out surge pricing statewide. But the small town of Tullahoma, Tenn., began using time-of-use pricing in 2013, after the Tennessee Valley Authority, which sells energy wholesale to several utilities in the region, began charging cities higher rates during peak times of the day. Fort Collins, Colo., switched to the system this past October. An informal survey by the Coloradoan newspaper found residents “doing laundry or running the dishwasher during off-peak times, but dozens of people also said they turned down electric heating, turned off lights and avoided cooking during peak times.”

These transitions haven’t been smooth for everyone. Tullahoma customers who didn’t change their usage experienced a roughly 10 percent price increase, or about $10 more each month. Early testing of time-of-use in Fort Collins in 2017 resulted in two-thirds of customers paying $2 more.

Randolph wants Californians to understand that small lifestyle changes can make a huge difference. In the summer months, for instance, staying cool doesn’t have to mean paying more. “Pre-cool the house before peak-rates arrive,” he says, “and then you’ll be cool for the evening.”

Special Projects
Sponsored Stories
Sponsored
In recent years, local governments have been forced to adapt to a wildly changing world, especially as it pertains to sending bills and collecting payments.
Sponsored
Workplace safety is in the spotlight as government leaders adapt to a prolonged pandemic.
Sponsored
While government employees, students and the general public had to wait in line for hours in the beginning of the pandemic, at-home test kits make it easy to diagnose for the novel coronavirus in less than 30 minutes.
Sponsored
Governments around the nation are working to design the best vaccine policies that keep both their employees and their residents safe. Although the latest data shows a variety of polarizing perspectives, there are clear emerging best practices that leading governments are following to put trust first: creating policies that are flexible and provide a range of options, and being in tune with the needs and sentiments of their employees so that they are able to be dynamic and accommodate the rapidly changing situation.
Sponsored
Service delivery and the individual experience within health and human services (HHS) is often very siloed and fragmented.
Sponsored
In this episode, Marianne Steger explains why health care for Pre-Medicare retirees and active employees just got easier.
Sponsored
Government organizations around the world are experiencing the consequences of plagiarism firsthand. A simple mistake can lead to loss of reputation, loss of trust and even lawsuits. It’s important to avoid plagiarism at all costs, and government organizations are held to a particularly high standard. Fortunately, technological solutions such as iThenticate allow government organizations to avoid instances of text plagiarism in an efficient manner.
Sponsored
Creating meaningful citizen experiences in a post-COVID world requires embracing digital initiatives like secure and ethical data sharing, artificial intelligence and more.
Sponsored
GHD identified four themes critical for municipalities to address to reach net-zero by 2050. Will you be ready?