Time of Use Rates Lessons Learned After One Year

1. Time of Use RatesLessons Learned After One Year

2. Time of Use - Outline • Introduction/History • Intended Goal • Key Findings & Observations • Time of Use Rate Design Guidelines • Rate Design • Implementation Approach • Initial Results • Initial Feedback • Adjustments • One-year Observations • Path Forward • Phone Survey Data • Customer Data

3. Introduction/History For a market to correctly function, there must be elasticity in the demand curve. With fixed rates customers have no incentive to modify their use of electricity as the price changes on the wholesale market. Aligning the retail price of electricity to the wholesale cost gives those with the ability to shift their electric use an incentive to use electricity when the wholesale price is lowest. If Time of Use Rates are set up correctly, it is hoped that the customer could lower their rates and the utility would lower their generation, transmission and capacity costs.

4. About Groton, MA Groton, Massachusetts - founded in 1655, has a population of 10,636 (2009 Town Census) and is located in the Nashoba Valley area in northwestern Middlesex County. Groton has an area of 32.54 square miles. There are 106 miles of plowed or maintained roads within the town. Town Hall is 320 feet above sea level and the highest elevation is Chestnut Hill Road at 516 feet above sea level. The median household income is $82,869.

5. Intended Goal Groton Electric’s goal with Time Of Use Rates is to create a simple structure where customers will be motivated to shift a portion of their electric use from the high cost peak hours to the lower cost off peak hours saving themselves money and reducing the generation, transmission, and capacity costs of Groton Electric.

6. Key Findings and Observations The most encouraging finding after one year is that while the customers voluntarily using the Time of Use rates shifted their use 2.74% from the peak hours to the off peak hours, they reduced their contribution to Groton Electric’s monthly peak hour (which determines transmission costs) by 17%.

7. Time Of Use Rate Design Guidelines At the end of 2008, Groton Electric completed a 900 MHz two-way communication meter system for residential customers. Since we only have hourly usage data for residential meters, the initial Time Of Use program is only being offered to residential customers. When creating the rates, we had three primary guidelines: • Make the Rates Revenue Neutral • Keep the Program Simple • Align retail price to wholesale price

8. Rate Design After looking at rate design guidelines, Groton Electric created a 7-11 rate structure by dividing the day into four segments. The rates were adjusted and placed into three categories to achieve our goals. 11:00 pm – 7:00 am Low (Off-Peak) Rate 7:00 am – 11:00 am Middle (Mid-Peak) Rate 11:00 am – 7:00 pm High (Peak) Rate 7:00 pm – 11:00 pm Middle (Mid-Peak) Rate After analyzing wholesale market price variation for 2008, Groton Electric designed the three rates with a slight benefit given to the lower rate. An additional concern was factored in because of how we pass our NYPA preference power credit to our customers. This concern was addressed by creating two time-of-use rates - one for customers who use less than 1000 kWh/month and one for customers who use greater than 1000 kWh/month.

9. Time Of Use Rates Effective January 1, 2009 As of May 2010, the rates are expected to remain constant for the near future.

10. Implementation Approach After receiving Board approval of the rates, the next challenge was the ability to incorporate the new rate structure into our billing program and to present it in an understandable format on the bill. This was designed, developed and demonstrated during the December 2008 billing cycle. We then recruited Time of Use customers in our January 2009 Newsletter. After one year of analysis, the time of use rates were demonstrated to have the effect of shifting use. A second push for customers to voluntarily join the program was presented in the April 2010 Newsletter.

11. Initial Results Percentage of customers signing up Within a relatively short period of time we had one percent of our customers enrolled in the program. Customer Mix At the one year mark, 79% of the time of use customers were in the rate class for residential customers who use less than 1000 kWh per month. Groton has a significant number of large homes that use a higher-than-average amount of electricity, but at this time the large residential customers have not shown much interest in this program. Average usage After one year, the profile of the average customer using time of use rates is very close to the average residential customer in Groton. Groton average residential customer uses 859 kWh/month Groton average time of use customer uses 836 kWh/month The average Time of Use customer shifted 2.74% of their use from the higher cost peak rate period to the lower cost off-peak rate period in 2010.

12. Initial Feedback Enthusiasm 25% of the customers in the program were very conscious about their use and successfully shifted between 4.3% and 9.8% of their use from peak hours to off peak hours. Disappointment One lesson learned was that customers who have considerable air conditioning use will probably see their total bill increase under the Time of Use rate. Initial screening should discourage customers with significant air conditioning from signing up for the program, or at least explain to them what may happen to their bills during the summer months. In the first year of the program this group of customers was not happy as soon as the warm weather hit. By the end of the summer many of them had dropped out of the program.

13. Feedback Cost / Benefit analysis One customer who was very successful at shifting electric use and reducing the cost of electricity during 2009, decided to withdraw from the program in March of 2010 because shifting their electric use was too stressful and they wanted to enjoy the summer.

14. Adjustments Weekends • Initially implemented the Time of Use rate schedule Sunday – Monday to ensure the lowest rate possible during the 11:00 pm – 7:00 am off-peak time slot • Results and customer feedback encouraged Groton Electric to consider lowering the weekend peak rate to the mid-peak rate so customers could do their household chores during weekend days • After seeing that shifting use was actually lowering Groton Electric’s costs, the Board approved reducing the weekend peak rate to the mid-peak rate.

15. Time of Use Rates

16. One-year Observations After one year, we have observed that it is difficult for the average residential customer to shift a large portion of their use. We have a small number of customers who have put timers on their hot water heaters and are passionate about only running their appliances from 11:00 pm to 7:00 am. The clear winners in the time of use rate class are customers who have pool pumps AND who also do not use a significant amount of air conditioning. We have seen that a small shift in use (2.7%) has translated into a significant reduction in those customer’s contribution to Groton Electric’s peak hours (17%).

17. One-year Observations The savings we realized in reduced capacity and transmission costs were able to be returned to the customers in this class by the reduction in weekend peak energy costs. We will continue to monitor this program and hopefully this summer we will have a significant heat wave, to test our results under real peak conditions. Usage changes As a class, the total shift for all customers in the time of use rate category was 2.4%. When their use change was weighted by their average load, the time-of-use customers as a whole successfully shifted their use 2.7%. This indicates that customers with larger loads were able to shift a larger percent of their use than customers with smaller loads.

18. Path Forward Groton Electric has started deploying commercial smart meters capable of time of use billing and plan to have all commercial customers deployed by the end of 2010. This will enable Groton Electric to analyze hourly load data to determine a rate structure that will be revenue neutral for a voluntary commercial time of use rate class.

19. Phone survey data One customer shifted their use 9.8% • They accomplished the shift by having a general awareness and changing their habits. They consciously avoided doing certain things between 11:00 am and 7:00 pm; they also put their pool pump on a timer. • One customer stopped using the clothes dryer • At least one customer put a timer on the hot water heater • Many customers mentioned they put effort into running appliances off-peak • Most of the customers who had significant shifting used a pool pump timer

20. DATA As shown below, this time of use customer who entered the voluntary rate on January 1, 2009 was successful at shifting their electric use. In addition to increasing their off-peak use from 23% to 32%, they decreased their electricity use during the peak period from almost 38% to under 32%.

21. DATA A spreadsheet with the hourly usage data for all customers in our time of use rate classes is available with identifying information eliminated. If you would like this file, please contact Tammi Lemire at tlemire@grotonelectric.org The file can be opened by Excel 2007 or Open Office and is currently 11.2 Mb so it may not make it through many email systems. If your email can not handle a file of that size, please include ftp information or mail a usb drive to: Groton Electric Light Tammi Lemire 23 Station Avenue Groton, MA 01450