Customers normally pay the same price for the electricity they use whenever they use it. This is called a flat rate and can be something like 12 cents per kilowatt-hour (kwh). Dynamic pricing is a rate design that changes the price based on when the electricity is used. Dynamic pricing gives customers better price signals so they will conserve more energy when it is expensive and use more when it is lower cost. This improves the utilization of the generation system and reduces overall costs for everyone.

There are several types of dynamic pricing that already have been tried in different places, and there will likely be more designs developed as we move to a Smart Grid metering system for everyone. Some of the more common dynamic pricing rate designs are described below:

Time Of Use (TOU) – The rate charged per kwh varies by what time of the day it is and what season it is. For example, high prices will be charged on summer afternoons and winter evenings while overnight and weekend rates are very low. Generally there are blocks of hours charged the same rate within each day, and that pattern repeats itself for all weekdays in the same season.

Critical Peak Pricing (CPP) – Rates are extra high on the hottest summer days and the coldest winter days when generation systems are running at their maximum. These Critical Peak days are not known in advance. They are declared as needed by the utility offering the rate and customers are notified of the Critical Peak periods with some advance warning (usually several hours before). In return, customers save money on the other hours of the year because they are paying slightly lower rates during those times.

Peak Time Rebate (PTR) – Customers are given a rebate if they reduce their usage during Peak Times called by the utility. This is similar to CPP, but instead of paying a higher price for what they use during critical periods, customers pay the regular rate and get a rebate for the amount of energy reduction they are able to achieve during that time compared to their normal usage. The rebates are offset by a slight increase in rates for all other hours of use.

Real Time Pricing (RTP) – Customers pay a different rate every hour, and the rate matches the market price for electricity at that hour.

Wisconsin Public Service Corporation Dynamic Pricing Impact Evaluation. WPSC has offered Time of Use and Critical Peak rates to their residential customers for many years. They also tested some new rate designs in iCanConserve, a community-based controlled experiment. Daniel prepared multiple years of hourly data for participating customers and their appropriate control groups, and Mary estimated the impacts for both the on-going and the new rate designs. (2012)

WPSC Response Rewards Critical Peak Pricing Impact Update. Mary and Daniel estimated multiple year impacts for WPSC's on-going small business Critical Peak rate, Response Rewards. (2012)

AIU Power Smart Pricing. Mary served as the project leader for the evaluation of the Ameren-Illinois Power Smart Pricing program, a real-time pricing program for Residential customers. The evaluation included impact analysis, net benefits evaluation and presentation of results to the public. Daniel merged customer usage data with data from several previous surveys, analyzed weather data to determine hot days to study for pre-cooling analysis, and created three-dimensional charts with custom colors to mark the third dimension. Three annual reports were filed with the Illinois Commerce Commission and results were presented at annual public meetings. (2008 to 2011)

ComEd Residential Real-time Pricing. Mary prepared benefit-cost analysis for the Commonwealth Edison Residential Real-Time Pricing rate and supported the analysis through the ICC hearing process. (2007 to 2011)

PSE myPower Pilot. Mary analyzed impacts of Time-of-Use and Critical Peak Pricing rates, both with and without programmable thermostats, for Public Service Electric and Gas' myPower Residential Demand Response pilot in New Jersey. Daniel prepared the data, including an analysis of reliability for several different types of AMI meters and communication systems. (2006 to 2007)

WPSC Response Rewards Critical Peak Pricing. Mary provided load and market analysis for development of Critical Peak Pricing rates for commercial and industrial customers at WPSC, as well as program evaluation. Mary was instrumental in developing customer collateral to promote the program. This included development of customized bill comparison reports for targeted customers and the design of a continuous real-time savings calculator for each participant's Web portal. (2004)

WPSC Residential Critical Peak Pricing Pilot. Mary designed, managed and evaluated Wisconsin Public Service Corporation's pilot to investigate Residential customer response to Critical Peak Pricing rates in combination with two-way communicating thermostats and color-changing orbs as price period indicators. Focus groups were held to understand customer preferences related to the rate design. (2003)