SMUD sees early success with dynamic pricing pilot

For the second summer in a row, the Sacramento Municipal Utility District (SMUD) says its dynamic rates pilot is being received well by participating customers and is showing positive results for the utility in terms of reducing load. The project, called Smart Pricing Options (SPO) is designed to engage customers to partner with SMUD to reduce peak demand, keeping rates stable and saving customers money on their electric bills.

To encourage customers to conserve during peak periods, special time-based prices were designed that provide a clear high price signal during summer peak periods and reward customers by reducing prices during non-peak periods.

The experimental pricing is in effect June through September 2012 and 2013. As SMUD begins the second of two consecutive summer periods, the pilot includes seven treatment groups, and three control groups of residential customers. Rate offers are combined with feedback tools and educational materials. It’s one of the largest dynamic pricing pilots in the country and will likely have significant policy implications for all utility customers.

In April 2012, SMUD completed a successful smart meter deployment. The SMUD smart meter deployment continues to garner mid-90th percentile customer satisfaction levels. That project began in late 2009 and SMUD installed more than 620,000 smart meters upon which began the build out of the SMUD smart grid.

Using $127.5 million U.S. Department of Energy (DOE) ARRA SGIG funding, SMUD launched SmartSacramento, a $308 million public-private partnership. SmartSacramento uses a suite of programs based on two-way digital interaction.

Central to the two-way utility-customer relationship is energy pricing. The digital platform allows SMUD to set retail prices closer to the cost of delivering energy based on time of use and other factors. Utilizing about $11 million of the SGIG funding, SMUD developed SPO.

The smart grid is changing the role of utilities and their customers, ultimately putting energy provider and end user on the same footing with access to individualized energy use information. Public power utilities like SMUD have long understood the partnership role community- and customer-owners play in daily business operations. Now, the smart grid provides channels to make that relationship much more productive.

SPO’s objective is to study customers’ adoption and success with three different dynamic rates. Some customers were put on the rate by default while others were proactively recruited. So far, the program is exceeding all expectations. SMUD expected to recruit 7,800 customers for the time-based rates and successfully recruited more than 8,800 customers in seven months.

SPO set out to achieve a goal of 15 percent enrollment for the voluntary rates and exceeded the goal with close to 20 percent acceptance. Of those put on the rate by default, only 10 percent opted out. Of those who opted to enroll, fewer than two percent chose to leave the selected rate over the summer of 2012.

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