California Perspective on Real Time Pricing

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California Perspective onReal Time Pricing

• Michael R. Jaske, Ph.D.
• California Energy Commission
• Committee on Regional Electric Power Cooperation
• April 18, 2001

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What is Real Time Pricing?
a. Any rate design in which retail prices vary
by hour of the day for different days of
the week. b. Generally RTP designs compute
retail prices in an hour based on
wholesale market prices at that hour. c. RTP
requires (1) interval meters synched with
time (2) telecommunications to
upload/download usage data (3) rate designs
affecting total electricity bill.
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How does RTP differ from TOU rates?

• TOU rates have prespecified values for groups
• of hours that are thought to have similar
• costs of generation.
• TOU meters do not keep a chronological record
• of usage,but merely accumulate usage into
• 3-4 buckets of hours.
• There is no necessary correlation between TOU
  rates
• and wholesale market prices.

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What are the key benefits of RTP?

• RTP rates are superior to TOU rates in
  conveying
• actual market prices to end-users
• RTP rates elicit responses from end-users when
• market prices are actually high or low,
• not when regulators believe prices ought to be
• high or low.
• RTP rates are much superior to TOU rates
• in providing demand responsiveness as a
• counter force to generator market

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What are the costs of RTP?

• Development of an RTP signal that is
  representative
• of purchases at the margin
• Metering and telecommunication installations
  at many end-user sites
• Modifications to billing systems to
  accommodate massive increases in usage data
• Loss of certainty in rate structures.

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How do proposed TOU rates compare to RTP?

• The 3/26/2001 Assigned Commissioner Ruling in
  the Rate Stabilization proceeding proposed very
  large increases in TOU on peak rates, e.g.,
  increasing from 0.06 to 0.36/kW.
• (1) Implication massive cost increases for
  peak summer use or major disruption to
  traditional business activities
• (2) Compared to market prices, 0.36/kWh
  probably too high in many lower demand hours,
  e.g., a cool June afternoon
• (3) Compared to market prices, 0.36/kWh is
  probably too low to fully recover market costs
  in highly stressed hours.
• An RTP based on market prices would revise these
  retail rates so that they were based on
  supply/demand conditions pertinent to that hour
  driving imbalance energy prices.

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How can retail rates include RTP?

• Set retail rates for commodity energy equal to
  wholesale market prices and separate charges
  can recover costs of transmission,distribution
  and other utility costs
• Blend RTP retail rates based on spot market
  purchases and regulated costs of utility-owned
  power plants and long run contract purchases
• Retail rates can be the rate for marginal
  changes in consumption relative to a historic
  baseline usage pattern, e.g., the Georgia Power
  RTP approach.

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What is California doing with respect to RTP?

• AB29X provides 35 million to the CEC for RTP
  equipment installation for all end-users gt 200
  kW
• In current CPUC Rate Stabilization proceeding,
  several parties advocated RTP as element of
  market structure
• CEC recommended in rate design testimony to CPUC
  on 4/13/2001, that RTP be endorsed as a policy
  with implementation in phases, and proposed
  that a Georgia Power-style RTP supplement be
  available to any end-user with appropriate
  metering equipment
• CAISO began releasing day imbalance energy costs
  on 2/12/2001, and wants to generate and publish
  imbalance costs on an hourly basis as an RTP
  price signal.

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Why should Western States be interested in RTP?

• Many utilities in western states are net
  short meaning their own utility-owned and
  controlled generation is less than their loads.
  All such utilities and/or their customers are
  exposed to short term market prices.
• Even net long states can be vulnerable to
  short supply if they have merchant plants that
  can sell elsewhere
• To the extent each utility is exposed to
  Western short term market prices, all such
  utilities and/or their customers benefit when
  any utility using RTP principles cause market
  clearing prices to decline.

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California Perspective onReal Time Pricing

• Michael R. Jaske, Ph.D.
• California Energy Commission
• Committee on Regional Electric Power Cooperation
• April 18, 2001

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