Meet the Experts Carl Pope Lester Brown Kurt Yeager Jane Perkins David Freeman Lord John Browne William McDonough Paul Craig

Sierra Club Energy Forum Ahmad Faruqui, Charles River Associates, Oakland, CA: What do you see as the role of innovative rate design and advanced metering in improving the economic efficiency of our energy system? In most markets today, whether restructured or not, consumers do not receive accurate price signals that reflect the time-varying costs of electricity. This is due, in part, due to the inability of the installed meters to convey such price information to retail customers, and in part to the reluctance of regulatory agencies to send such price signals through to the retail customer. Paul Craig: Great point, and right on! Accurate time-of-use price signals are an important way to achieve efficiency. The electrical sector is a first-rate candidate, but roads and bridges are also. Rates should reflect full costs, among them environmental, social and military security costs. Time-of-use electricity metering permits paying producers what their electricity is worth at the moment, and charging consumers based on how much it costs to generate the electricity at any instant. Time-of-use metering is on its way. It's beginning with the largest users. I expect it will soon start to appear throughout the economy as metering costs come down and as smart appliances appear with the ability to run automatically when power is cheap. Refrigerators that make ice and defrost in the middle of the night; clothes washers and dryers with the capability of deciding when to run (and which don't wrinkle), and clever heating and cooling systems. Regulatory agencies are a bit slow in coming around, but I believe they will. If carefully implemented, time of use pricing and billing is good for the environment and good for the economy. David Freeman: We see a very large and growing role for real time pricing in California. The state has already purchased and installed real time meters for larger customers. The California Power Authority is financing real-time meters for smaller customers. And the CPUC and CEC are actively working together to advance rate-designs to reflect real time pricing. Kurt Yeager: We also agree. Power costs vary with demand, and are typically highest on hot summer afternoons when air conditioning use is at a peak. With extreme weather, especially combined with outages of generating capacity, power costs can soar to astronomical levels. Yet typically, consumer prices for power remain unchanged at an average fixed rate. EPRI studies have shown that a small amount of conservation during extreme cost periods can have a disproportionately large impact in reducing costs. One effective way to get that conservation, when it's needed, is to pass the high costs on to the consumer using dynamic rates that are much higher than normal during critical days or time periods, yet are lower than the average the rest of the time. Customers who conserve during the extreme periods save money on their own bills, but there's the added benefit that their conservation reduces the costs for everyone. Advanced meters make these efficiency savings from innovative rate designs possible, but the meters have other benefits. First, they enable real customer choice, not just of supplier but when and how much energy to buy, ultimately through smart appliances programmed to meet each individual's customers needs and priorities. Second, because these meters can be read electronically, they also save the cost and transportation energy of going door to door to read them manually. It's hard to imagine that our grandchildren will be reading meters manually in 2050. Choose another topic Energy Forum main | Make your own energy movie | More in Sierra magazine Up to Top