Time-of-Day Electricity Pricing

S E A T T L E, Aug. 6, 2001 -- Ken and Carol Nielson, of Kirkland, Wash., have a nightly ritual. They start the household chores at 9 p.m. — and not a moment sooner.

The Nielson's are among 1 million Puget Sound Energy customers whose electric meters contain a computer chip informing the power company not only how much electricity they're using but also when they're using it.

Puget Sound Energy hopes the program — the first large-scale attempt at real-time pricing for residential users — can help it avoid the type of onerous rate increases that have recently bedeviled other West Coast utilities. Encouraging off-peak consumption reduces the threat of blackouts and cuts the company's costs, and allows them to pass the savings on to consumers.

"We're using the same amount of power, basically, but we're using it at different times," Ken Nielson said.

Off-Peak Consumption Encouraged

Many utilities use time-of-day pricing for industrial users, said Puget Sound Energy spokesman Roger Thompson. But utilities in other states are entertaining the idea of applying the concept to residential customers.

The Seattle company's new rates took effect with customers' June bills, but the program was already showing results even before the financial incentives kicked in, Thompson said. Electricity use during peak hours declined 4 percent in the six months since some of the company's customers have been receiving monthly statements illustrating their time-of-day consumption patterns. Armed with such evidence, some customers willingly alter their use patterns.

It's the same principle the telephone company has used for years — charging less for calls made after 11 p.m. and on weekends.

Conserve Without Cutting Back

Under Puget Sound Energy's so-called Personal Energy Management program, customers pay about 15 percent less than the prevailing flat, fixed rate for electricity used between 9 p.m. and 6 a.m. Monday through Saturday and all day Sunday.

Energy experts say that power companies on the West Coast can no longer afford flat, fixed-rate billing schemes.

"If everyone went to an all-you-can-eat restaurant and they charged based on what everyone ate, everyone would order caviar," said Severin Borenstein, director of the University of California Energy Institute.

The Seattle experiment will demonstrate the potential of real-time pricing to provide consumers with a financial incentive to conserve.

"In California last summer, a 2½ percent reduction in usage at peak times would have saved California $700 million," said Gary Swofford, Puget Sound Energy's vice president and chief operating officer. "It's a lot of money for a very small reduction in usage."

For the Nielson's, it's a chance to conserve without really cutting back. It's a change of schedule that doesn't require a change of lifestyle.