It all started with a vision in 1995. As the Internet was beginning to take shape, the Puget Sound Energy (PSE, Bellevue, Washington, U.S.) senior management team knew it would be critical to increase customer interaction to keep up with customer expectations in the future. The team envisioned the utility of the future providing real-time energy consumption information to allow customers to make critical choices — when to use energy and when to wait. This vision has grown into the most successful energy-management program in the United States.

A New Way to do Business

Historically, utilities have charged fixed prices for energy regardless of how demand affects the cost of service. The fixed rates utilities charge have given customers the illusion of insulation from the volatility of wholesale energy pricing. Most consumers are unaware of how sharp peaks in demand dramatically affect the utility's cost of service and, therefore, make few attempts to conserve or shift their energy usage until it is too late and wholesale energy prices have spiked. This creates unnecessary costs that ultimately are passed on to those same consumers.

PSE realized that by offering the right choices, and enough of them, they would be creating a happy and loyal customer who would benefit from PSE's offerings that are unavailable elsewhere. PSE also recognized that empowering customers with these tools could avert future energy shortages, protect the environment by reducing the need for more power plants, and reduce their dependency on peak-priced energy.

With this vision in mind, PSE embarked on a multi-phase project in the fall of 2000, with the goal of placing its residential and small commercial customers on a dynamic electric rate that was tied directly to the fluctuating price of electricity.

How it Works

The utility gathers customer-usage data by using newly developed metering and wireless network technology that gathers and stores this data in as small as 15-minute increments. The data is collected, processed and transmitted daily to the utility's customer-information system (CIS). Newly developed CIS applications take that usage information, match it with the market price at the time of usage and then provide that information back to customers, making it possible for them to make informed purchase decisions.

PSE leveraged real-time data from the SchlumbergerSema (New York, New York, U.S.) CellNet wireless fixed network to launch Personal Energy Management (PEM), a program that provides online consumption and cost information for managing electricity use. CellNet feeds high volumes of real-time consumption information into several integrated systems:

  • PSE's ConsumerLinX consumer care and billing system

  • SchlumbergerSema advanced information services and Web site applications

  • PSE call center applications.

The PEM application of this technology is an industry first and the world's largest implementation of advanced services ever attempted with a networked meter reading system.

Through the integration of these systems, consumers can view their consumption rates and compare usage patterns over an entire year. Gas customers can view their energy-usage data on a daily, weekly and monthly basis, whereas electricity customers can view time-of-day (also known as time-of-use) rates. Knowledge of how pricing varies based on demand at different times of day allows customers to take control as never before to shift usage to hours when electricity is in less demand and, therefore, less expensive.

The Results Speak for Themselves

In Phase 1, PSE began providing usage information to 400,000 residential and commercial customers in December 2000. In addition to monthly information in the billing statements, its customers are able to view their usage data over the most recent 24-hour period via the PSE Web site (Fig. 1). They also can see the time blocks in which their usage occurred. Customers without computer access can call and talk to a PSE call center representative. Armed with their usage information, the time blocks in which they occurred and the price of electricity in each of those time periods, customers can now make decisions about how much energy they are using and when they want to use it. The next day they can look and see the impact of their choices.

Customer acceptance and use of this information has been exceptional. In a recent survey conducted by PSE, 91% of residential customers and 72% of business customers were aware of the information program. Customers found the information they received from the PEM program to be meaningful, easy to understand and believable (Fig. 2). The most important things that they learned were:

  • The need to conserve energy
  • How they used energy by time-of-day
  • The need to shift to off-peak energy usage
  • How to save and shift their energy usage.

The survey also showed that 79% of residential customers and 70% of business customers took actions to alter their energy use. Simply as a result of the information they received about their usage, 43% of residential customers shifted when they used electricity and 41% reduced their usage. For business customers, 4% shifted their usage while 45% reduced what they used. These are truly outstanding results.

Phase 2 of the PEM program involved advancing from information-only to adding the financial incentive of pricing electricity according to the time during which it is used, so called time-of-use pricing. The Washington Utilities and Transportation Commission approved the filing and the program began on June 1, 2001, with 300,000 residential customers. Figure 3 demonstrates how the price per kilowatt-hour varies based on the time of day the power is used, with 10 a.m. to 5 p.m. and after 9 p.m. providing the most economic times of day to use energy.

How did PSE's customers react? More than 90% of the customers who were part of the time of day-pricing program took action (Fig. 4). This was a significant increase over the number of customers who took action in the “information-only” program of Phase 1. Power-usage data from June and July 2001 indicate that variable, time-sensitive rates are promoting a strong conservation ethic and sensitivity to variable energy pricing among PSE customers. On average, residential customers paying time-of-day rates shifted about 5% more of their electricity usage, compared to information-only customers, away from the morning and early evening hours when public demands for power — and wholesale power prices — are highest.

Phase 3 of PSE's PEM pilot program will run from October 2001 through September 2002 and expands the time-of-use pricing billing to 20,000 businesses. Since December 2000, these businesses have been receiving detailed information each month from PSE about their tiered pricing for energy usage, along with fluctuating wholesale costs of providing their power. The residential customers in the trial have been paying variable, time-of-day rates for electricity since May 2001. They pay about one-third less during low-demand, off-peak hours than at high-demand times of the day (Fig. 3). The same time-based price differential will now apply to the businesses being added to the billing trial.

According to Gary Swofford, delivery vice president and COO for PSE, “The secret to success for utilities in the future will be providing consumers with technology tools that empower them to obtain energy pricing and usage information. Buying as much electricity as possible during inexpensive times of day and using less electricity during peak-demand periods have significant environmental and market-cost benefits.”

“The integration and development of the systems needed to provide real-time electricity pricing for PSE customers demonstrates that the technology is available now,” continued Swofford. “Our survey results show its value to customers. We have the means to achieve US$15 billion in annual power cost savings nationwide and in so doing, reduce the cost of electricity to customers, ensure that we are using the resources we have as efficiently as possible, and only build the new resources that are necessary.”

The bottom line is that everyone in the utility value chain wins.

Brian Pollom is the director of the Metering Networks Services at Puget Sound Energy. For the last five years he has been involved with AMR and Personal Energy Management at PSE, where he has been responsible for the deployment of a 1.4 million electric and gas meter fixed network system. Pollom has 23 years of experience at PSE. His utility background includes engineering and field operations in the area distribution, substation, quality control, standards and AMR.