Time-of-use rates are in full swing in California. San Diego Gas & Electric began the transition of several hundred thousand customers to the new rate structure back in March. Already more than 300,000 customers have shifted to the new rate option.
For those people, the most expensive time to use electricity is now from 4 p.m. to 9 p.m. — a time range when most people are coming back from work, starting dinner or doing household chores like laundry. As a result, many consumers are questioning why the transition is happening and are worried about how it will impact their bills.
What is Time of Use?
Time-of-use billing plans aren't new. Utilities often have these plans as an option for customers who want to save money on their electricity bills. And it helps power producers decrease demand on the electric grid.
That's because time-of-use plans encourage customers to use energy when most other people are not — for example, at 10 p.m. when most households are turning their lights off. There is also a lower price because when there is less demand and more energy supply, the price is cheaper.
SDG&E has offered so-called time-of-use plans for more than a decade, with roughly 150,000 residential and 80,000 business customers enrolled in the program.
The difference now is that nearly all customers will be switching over. And it will be an opt-out program.
California's Changing Electric Grid
But, SDG&E isn't the only utility to make the switch to time-of-use billing. In 2013, the California Public Utilities Commission mandated that all investor-owned utilities switch their customers over to time of use. SDG&E just happens to be the first one to implement a full transition.
There are a couple of reasons behind the transition.
First, back in the the 2000s, the state saw more electricity demand and a shortage in energy supply. This led to all-time high electricity rates and power outages. And it was also when utilities started to see dire financial concerns, according to the U.S. Energy Information Administration.
These issues created concern around the state's energy security, so utility regulators implemented residential rate reforms that would encourage energy efficiency and cost savings.
Second, California's energy mix is rapidly changing. The state has major climate change goals that require utilities to add emission-free energy sources, like solar, to the grid. Right now, around 30% of the state's energy supply comes from renewables, and that's mandated by law to increase to 60% by 2030.
With natural gas plants, utilities can predict how much and when electricity is being produced. But, as Scott Anders of the Energy Policy Initiatives Center at the University of San Diego explained, more renewables on the grid means less control.
"One of the challenges of renewable energy is that they are variable resources. They don’t produce energy all the time like traditional resources do. And you can’t control them," Anders said. "Solar panels only produce when the sun is shining and wind turbines only produce when the wind is blowing.”
What emerged from these two mandates is a default time of use rate plan to encourage energy usage when there's cleaner and cheaper solar energy on the grid.
Unpacking the 4 to 9 p.m. Peak
With time-of-use based on solar energy, there is a shift in the traditional understanding of electricity supply and demand. Typically, there are large amounts of energy demand during the day or 11 a.m. to 6 p.m. So, in the past, the peak rate used to be in that window.
With solar, that demand period hasn't changed. But the energy supply has. Here's why:
The sun is shining in the morning. And with an electric grid packed with solar arrays, it's producing an abundance of energy — perhaps more supply than necessary. Therefore the price is cheaper.
At around 4 p.m., when the sun starts to set, solar production decreases. But there is still energy demand. Utilities have to power up their more costly natural gas plants. So, the electricity is more expensive.
When residents start to head to bed around 9 p.m., demand goes down. And so does the price.
What that means for consumers
To get ready for this shift, SDG&E has been sending out mailers to all of its customers. Still, many are worried about that 4 p.m. to 9 p.m. window, thinking they will end up spending more on their electricity bills because they can't shift their schedules.
On June 24,KPBS asked SDG&E customers on Facebook how they felt about the rate change. And the response was fairly mixed.
Anne Jackson wrote, "For people who work, which is most of us, it makes it hard to come home and LIVE, cook, do laundry, help kids with homework, and have to pay more to be home in an already expensive community. I am a renter..."
And another, Susan Carol, said she already opted out. "I opted out of their new plan. It would not benefit me at all. All of my windows are west-facing. That means that all summer long my greatest need is in the afternoon, between 4 and 9, when the sun turns my condo into a little oven. I have taken every precaution, such as thermal blackout curtains and such," she wrote.
However, some people said they didn't mind the change, like Doug Olive. "I find it no different than a carpool lane on a highway. Like a carpool lane, it's designed to encourage individuals to find alternatives during peak hours. I make a point to use the washing machine and dishwasher after 9 p.m. or first thing when I wake up," Olive wrote.
The type of flexibility Olive wrote about is the solution Wes Jones, communications manager for SDG&E, offers for customers concerned about the peak period.
"If you’re going to run your dishwasher, and it’s not a smart dishwasher ... it’s a matter of when do you use that dishwasher. Again, if you can’t program it or set a timer, just think about when you want to use it," said Jones. "If you can wait until 9 p.m. to start running it on your own that will help you save on your bill."
He also said customers could invest in smart appliances, which have timers and delays. That way, he said, it's possible to cool the house before coming home or run the laundry when at work. But, as some on the Facebook post wrote, it's just not possible for them to change their schedule.
There is always the possibility of opting out, Jones said.
"The main thing you have to think about with those households is you have a choice. They don’t have to transition to these time-of-use plans. If they feel like they can’t shift any of their usage and they have to use their appliances during that time, they may find the plan is not right for them, and they can opt-out," Jones said.
Consumers should be aware that using electricity outside those peak hours means using cleaner power, Jones said. SDG&E will have a one-year pricing guarantee, where if the customer ends up spending more on the time-of-use plan than the standard one, SDG&E will credit back the difference.
If time-of-use is inconvenient, the default plan chalks up to one extra step for consumers — opting out.
And since that's the case, some people have wondered, "What if everyone opts out?"
Jones said the utility is managing that challenge.
"We're going to be managing that throughout, but the goal is to get folks to adapt to these plans," Jones said. "It's a long transition. We do know there's a lot of strain on the grid from 4 to 9 p.m."
What about low-income customers?
Smart appliances don't come cheap. Smart dishwashers, for example, run hundreds of dollars on some online retail sites. For people who can't shift their schedule, an opportunity to save money on time-of-use could be inaccessible. Or, they may live in areas where high energy use is inevitable, like hot, inland locations.
In fact, that concern was brought up in a bill introduced last February, which never made it out of committee.
The Colorado Public Utilities Commission even denied a utility from implementing a time-of-use plan out of concern for low-income customers. The filing reads, "with an opt-out program, no matter how effective the education, there are going to be customers who will not be aware that they are on the new rates."
"This inevitability combined with EOC’s analysis of household income in Black Hills’ territory shows the potential for disaster."
When it comes to monitoring this potential impact with SDG&E's transition, Jones said consumers can see pricing plans on the SDG&E website.
"It's hard to say what type of plan will be best for that household because it depends on their usage," Jones said.
In the meantime, he said the website and the mailers have been providing consumer information.
