Electric Rates. Is this gonna be a problem?

The new Fort Collins electric rate structure is a big financial risk and doesn’t take in account our growing use of wind and solar.

The new structure increases rates during busy hours, or “peak hours”, of the day and lowers rates for the rest of the day (off peak). This is new to Fort Collins but other utilities have been doing it for years. The goal is usually to get people to reduce electric consumption (load) during peak times and shift their load to off peak times. This saves customers and the utility money.

Will you change the time of day that you use electricity to save money? You could blast the AC until 2pm and then turn it off to “coast” through the evening. You could run your appliances after 7pm. By doing just those things you could probably shift half of your load and save a decent amount of money.

That doesn’t sound too hard right? Well City Council doesn’t think you can do it. In fact, they are betting that people will not shift more than about 9% of their load. If they made a bad bet then our utility will not have enough revenue to meet the budget. This is a big risk. Our electric utility has been operating at a deficit for years. We already have 15% rate increases planned over the next 4 years. Customers of other utilities with time of day rates have significantly shifted load. If Fort Collins customers do the same then we will be facing even higher rate increases.

The Time Of Day (TOD) rate is soooo 2015! Back then coal and gas were the cheapest fuel for electricity and TOD made a lot of sense. Wind and solar are changing the electric landscape. In California electricity is now often cheapest when the sun is shining and the wind is blowing. That is usually during peak hours. This will be the reality in Fort Collins before we know it. We will be getting over 50% of our electricity from renewable resources by 2021, and possibly 100% by 2030. Excel plans to get over 50% renewable electricity by 2026. There is a very real risk that wholesale electricity will be cheapest when our utility is charging us the most. It took Fort Collins Utilities four years to develop this rate structure. We need to get working on the next one now if we are going to ready for the renewable electricity reality.

What we want to do is set a rate that encourages a matching of demand to supply. This is often called “dynamic rates”. A simple dynamic rate can be timed to predictable wind and solar production times. If our wind and solar produces the most from 2-4pm (typically) then we set the rate low from 2-4pm every day. That wouldn’t change on a cloudy day, the revenue difference would be absorbed in the utility’s annual average. A “smart” dynamic rate would change every hour of every day depending on real-time wind/solar production. Electric cars could use this rate to micromanage charging times. A “smart thermostat” could turn the AC on and off to match solar production. Household batteries could charge during cheap times and discharge during expensive hours. You could micromanage your load and bill each day but it probably wouldn’t be worth the effort for the small stuff. And if you don’t have the cool new “smart”toys you will still save money compared to the TOD rate.

The point is that the Time Of Day rates are out of date because they will soon not reflect when electricity is cheapest. In addition, they could potentially cause huge rate increases. A few of us utility nerds have pointed this out and were basically told to shut up and don’t worry about it. If TOD goes as planned then I will be the first person to say that I am wrong. If it does turn into a disaster then I will be publicly calling for the resignations of those responsible.

What do you think?