Transcript Presentation 98

CALIFORNIA ENERGY COMMISSION
California Perspective on
Real Time Pricing
Michael R. Jaske, Ph.D.
California Energy Commission
Committee on Regional Electric Power Cooperation
April 18, 2001 CALIFORNIA ENERGY COMMISSION
What is Real Time Pricing?
a. Any rate design in which retail prices vary
by hour of the day for different days of the week.
b. Generally RTP designs compute retail prices
in an hour based on wholesale market prices at that hour.
c. RTP requires:
(1) interval meters synched with time;
(2) telecommunications to upload/download usage data;
(3) rate designs affecting total electricity bill.
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How does RTP differ from
TOU rates?
• TOU rates have prespecified values for groups
of hours that are thought to have similar
costs of generation.
• TOU meters do not keep a chronological record
of usage,but merely accumulate usage into
3-4 “buckets” of hours.
• There is no necessary correlation between TOU rates
and wholesale market prices.
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What are the key benefits of
RTP?
• RTP rates are superior to TOU rates in conveying
actual market prices to end-users;
• RTP rates elicit responses from end-users when
market prices are actually high or low,
not when regulators believe prices ought to be
high or low.
• RTP rates are much superior to TOU rates
in providing demand responsiveness as a
counter force to generator market
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What are the costs of RTP?
• Development of an RTP signal that is representative
of purchases at the margin;
• Metering and telecommunication installations at
many end-user sites;
• Modifications to billing systems to accommodate
massive increases in usage data;
• Loss of certainty in rate structures.
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How do proposed TOU rates compare to
RTP?
• The 3/26/2001 Assigned Commissioner Ruling in the Rate
Stabilization proceeding proposed very large increases in TOU
on peak rates, e.g., increasing from $0.06 to $0.36/kW.
(1) Implication: massive cost increases for peak summer use
or major disruption to traditional business activities;
(2) Compared to market prices, $0.36/kWh probably too high
in many lower demand hours, e.g., a cool June afternoon;
(3) Compared to market prices, $0.36/kWh is probably too
low to fully recover market costs in highly stressed hours.
• An RTP based on market prices would revise these retail rates
so that they were based on supply/demand conditions pertinent
to that hour driving imbalance energy prices.
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How can retail rates include
RTP?
• Set retail rates for commodity energy equal to
wholesale market prices and separate charges can
recover costs of transmission,distribution and other
utility costs;
• Blend RTP retail rates based on spot market purchases and
regulated costs of utility-owned power plants and long
run contract purchases;
• Retail rates can be the rate for marginal changes in
consumption relative to a historic baseline usage
pattern, e.g., the Georgia Power RTP approach.
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What is California doing with respect to
RTP?
• AB29X provides $35 million to the CEC for RTP
equipment installation for all end-users > 200 kW;
• In current CPUC Rate Stabilization proceeding, several
parties advocated RTP as element of market structure;
• CEC recommended in rate design testimony to CPUC on
4/13/2001, that RTP be endorsed as a policy with
implementation in phases, and proposed that a Georgia
Power-style RTP supplement be available to any end-user
with appropriate metering equipment;
• CAISO began releasing day imbalance energy costs on
2/12/2001, and wants to generate and publish imbalance
costs on an hourly basis as an RTP price signal.
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Why should Western States be
interested in RTP?
• Many utilities in western states are “net short”
meaning their own utility-owned and controlled
generation is less than their loads. All such
utilities and/or their customers are exposed to
short term market prices.
• Even “net long” states can be vulnerable to short supply
if they have merchant plants that can sell elsewhere
• To the extent each utility is exposed to Western short
term market prices, all such utilities and/or their
customers benefit when any utility using RTP
principles cause market clearing prices to decline.
CALIFORNIA ENERGY COMMISSION
California Perspective on
Real Time Pricing
Michael R. Jaske, Ph.D.
California Energy Commission
Committee on Regional Electric Power Cooperation
April 18, 2001
CALIFORNIA ENERGY COMMISSION
References
Severin Borenstein, Frequently Asked Questions
about Implementing Real-Time Electricity Pricing in
California for Summer 2001, UCEI paper, March
2001.
Severin Borenstein, The Trouble with Electricity
Markets (and some solutions), UCEI, PWP-081,
January 2001.
Michael T. O’Sheasy, How to Buy Low and Sell
High? Spot Priced Electricity Offers Financial
Rewards, Electricity Journal, Volume 11, Number 1,
January/February 1998.
CEC, Testimony of Michael R. Jaske Regarding Rate
Design, CPUC Docket A.00-11-038 et al, April
2001.
CALIFORNIA ENERGY COMMISSION