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Time-Varying Pricing For Electricity

Pricing electricity by demand saves consumers money and encourages more efficient usage:

Sacramento Metropolitan Utilities District (SMUD) has decided that time-varying pricing makes sense. It saves the utility money because it doesn’t have to buy as much expensive wholesale power during peak periods. And, it can pass these savings on to customers. It thus has charted a plan to move most customers onto time-varying pricing as the default rate by 2018.

Naturally, this being California, there’s a regulatory problem:

But California’s investor-owned utilities are blocked by recent legislation from introducing default dynamic pricing until 2018. This is foolishness masquerading as consumer protection. Flat-rate pricing creates economic waste and hurts consumers. Plus, as I’ve blogged about earlier, adopting time-varying pricing could help integrate renewables onto the electric grid.

Pricing according to supply and demand is just common sense, so it’s not entirely surprising that legislators would have a problem with it.  As opposed to Xcel’s ill-fated Boulder Smart Grid, this one is less ambitious, and more focused on outcomes than coolness.

Posted in Business, Economics.

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