electricity

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A free online service to track energy consumption launches on Earth day. It’s called Welectricty. You don’t need a separate smart meter; just your energy bills. If your friends sign up too, you can compare your usage with theirs.

Addendum: How Welectricity works video is here.

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Utility companies. So says the Wall Street Journal. Rebates are one popular approach for rewarding customers who cut back on their energy usage. Price discrimination – charging more at peak hours – is another.

Public Service Electric & Gas Co. gave 320 (New Jersey) customers advanced meters and special thermostats that let them control their heating and cooling much more precisely. Then the utility imposed high rates at certain times. The result: a dramatic 47% drop in usage among the test group.

Two participants, Bob and Helene Haney of Cherry Hill, N.J., say they not only reduced their household energy use at key times but also saved $350 in an 18-month period, cutting their utility expense by about 10%.

Under the program, the Haneys were charged high prices for electricity during the summers of 2006 and 2007 from 1 p.m. to 6 p.m. In addition, on up to five occasions each summer when the grid was especially stressed, the Haneys received an email alert from PSE&G. The utility told them it was imposing “critical peak” pricing the next day and would be charging $1.46 a kilowatt-hour from 1 p.m. to 6 p.m. instead of 23.7 cents. (Prices in the off-peak hours ranged from 3.7 cents to 8.7 cents a kilowatt-hour, less than the rate the Haneys paid before they joined the test.)

Mr. Haney, an engineer, says he set the family’s programmable thermostat so that the house temperature gradually would rise to about 80 degrees from 70 degrees by 6 p.m. on the critical days. The increase in temperature was so gradual, says Mrs. Haney, a retiree who cares for the couple’s grandchildren during the day, that “I didn’t notice any difference.” And once the need for conservation had passed, the thermostat dropped the temperature again.

Smart meter rollouts will get bigger. Pacific Gas & Electric plans to install 10.3 million advanced meters in California by 2011. Pepco plans to install 2.3 million in Maryland, Delaware, Washington D.C. and New Jersey by 2012.

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They cut back under both scenarios. That is the conclusion of a working paper from Peter Reiss of Stanford and Matthew White of the Wharton School at the University of Pennsylvania. The authors traced individual household electricity use in California from 1998-2001. In the first half of this period, electricity prices were relatively flat. In 2000, they doubled over a period of less than two months. After trying a price cap, lawmakers funded a $65 million public awareness campaign in 2001 urging conservation. Because Reiss and White collected monthly meter readings, and had exact time periods for price spikes and media and community outreach (plus random weather events), they are able to perform sophisticated statistical analysis of consumer reactions.

Their assessments about reactions to price rises are unequivocal.

Average household consumption fell thirteen percent over a short span of approximately sixty days, in response to an unannounced price increase. Since these results are obtained from actual (metered) energy use at the consumer level for a large representative sample of households, they leave little room to dispute the magnitude or timing of consumer behavior. The evidence here should be sufficient to dissipate any lingering views that consumers cannot

(or will not) respond quickly to energy price changes.

The assessment about the public awareness campaign is nearly as straight-forward.

The data reveal that the average household reduced its consumption significantly during the state’s public appeals for energy conservation, even though it faced no pecuniary incentive to do so. The fact that public pressure of this sort works at all raises the important question of whether prices or non-price mechanisms should be the preferred means of mediating energy consumption when a market shock requires it.

It can seem absurdly obvious to argue that people react to both financial incentives and social appeals. And yet the tendency to stress one side at the expense of the other in a political debate is often overwhelming. There is even a bit of this tendency in the last sentence above – “whether prices or non-price mechanisms should be…” But we will go on making the argument that the two are not incompatible, and suggest that policymakers think about how to design their non-price mechanisms to complement market events.

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