How utility rate design could make or break the energy transition

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Hello everybody, welcome. My name is Stephen Lacey. I am the executive editor. Of latitude media.

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We’re gonna start here in a couple of minutes and let folks stream in. So I just have a few words before we get going.

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For those of you who are new to latitude media, where a b 2 b media research and events company that covers tech, deals, and markets across clean energy and climate tech.

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We have a particular emphasis on the power sector and we’re covering everything from solar to batteries to virtual power plants to grid enhancing technologies to artificial intelligence and other technologies at the grid edge.

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And so. Lot of that intersects with the conversation that we’re having today, which is all about rates and the signals that we’re sending for those technologies.

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And We also make a bunch of podcasts and many of you may be familiar with those. Catalyst, Carbon Copy.

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Political climate and we make a show in in partnership with grid x called with great power it is a show about people working inside and outside of utilities who are helping shape the future of the electricity system.

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And so we’re highlighting their different areas of expertise. Where they’re tackling difficult problems in Tech adoption and market design in entrepreneurship and that’s out every other week and we actually had Dr.

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Ahmad Farouki who you’re going to hear on today’s event on one of our recent episodes and he talked about how you know he became focused on time of use electricity pricing after the California energy crisis and his experience with the good bad and ugly of electricity.

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Rates in the decades after and we’re gonna tackle that experience in part of our conversation. And you know, we also heard from a utility CEO who faced tough decisions about reforming that metering, power systems expert exploring AI applications, a PG and E strategies looking at new ways to deploy batteries.

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And more so you can go check out with great power and I think for those of you who are interested in this topic and rate design in particular you’ll find a lot of value in that show.

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We also, can we bring in the other panelists too? I just wanna make sure that they’re here with me, cause we’re gonna get started here in a minute.

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Finally, if you want to check out what we’re cooking on the research side, we’re doing a ton on artificial intelligence and virtual power plants.

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And so

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And so I know that A lot of you who are in the utility sector thinking about these issues may be interested in that so you can go latitude media.

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Dot com slash research to find out more about some of that research. Also, if you want to watch watch this event after it’s done or watch or listen to some of our other previous events, we just had one on transferable tax credits we’ve been talking about new materials in the solar industry you can go to latitude media.

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Dot com slash events. So this one will be linked there. You can watch it in full. And then we’re also going to have an edited version of this afterwards.

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So there are lots of ways you can revisit this conversation if you’re not taking notes fast enough and you want to go hear more about some of the concepts that we’re talking about.

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And of course, We want to hear from you, so we have a Q&A box. It’s very easy to find there down in the lower corner of your zoom screen and you can submit questions and I’ll be integrating those in throughout the conversation.

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So please feel free to submit questions early and often. And our team will flag some of those and I’ll start to bring them into the conversation.

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And so here we go. We are of course talking today about the future of rate design. And rates are a funny thing, right?

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Nothing sounds more than now than electricity rate design and nothing gets people more fired up. Then electricity rate design.

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It’s kind of akin to like the Federal Reserve. Very few people pay attention to the latest news on interest rate.

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Interest rate hikes or cuts, but like they feel that impact depending on the policy decision across the economy. And they have very strong opinions about it.

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And the decisions that we make about how to price electricity are more critical than ever. Impact how consumers react to weather related stresses on the grid, how quickly they electrify their homes.

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When they charge their EVs and avoid overtaxing the distribution system or in the case of low-income customers whether they can afford to participate in programs and make their homes comfortable.

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And time variant rates have been time varying rates have been around and in some form since the 19 seventys with some mixed results and according to research from Dr.

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Ahmad Farouki who is with us today many pilots have not lived up to expectations for a few reasons, a lack of evidence of benefits, customer backlash and uneven impacts on low income or disadvantaged customers.

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And the lack of smart metering infrastructure was also an early impediment. So what we’ll talk about all of those.

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Today we have around 100 million meters installed around the US covering nearly 70% of residential customers, but time varying rates only.

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Cover less than around 10% of those customers. So how do we create dynamic rates that are fair, transparent and effective at valuing distributed resources and you know making consumers happy and getting them to act in their own self interest and in the interest of the grid.

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And how do we use technology to design, implement those rates and perhaps eventually automate them on a real-time basis as many hope that we can eventually get to.

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So in this frontier forum, we are going to examine the imperative of good rate design and the consequences of getting it wrong.

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And we’re joined by Scott Engstrom, who’s the co-founder and chief customer officer at Gridx.

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Scott has spent 20 years in the power industry. Greedx itself was formed in 2,010 to build a platform that creates a single source of truth for how rates are working.

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The company has 25 million meters under contract with over 500 tariffs modeled across highly complex scenarios.

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And Scott, good to see you.

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For having me, Stephen really, looking forward to the conversation today. Certainly appreciate, what latitude media does around our industry.

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So very thankful to participate today and of course. Really great to be on the panel with Ahmed as well.

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And that I’m on is Dr. Ahmad Farouki. Ahmad is an energy economist.

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He’s 1 of the foremost experts on rate design and energy markets. He’s co-authored or authored more than a hundred 50 papers and co-edited 5 books on topics ranging from rate design to load forecasting to distributed energy adoption and he has promised to be extra candid with his conversation with his thoughts this conversation.

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I’m on good to see you.

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Yeah.

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A pleasure, yes, I, I will be blunt and candid and and hopefully hopefully somewhat entertaining.

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Wonderful. Well, the premise of this event is about rate design and how it could make or break the energy transition.

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So I want you both to start by making the case for me. Why is Ray design so critical when it comes to all these things like demand flexibility?

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Distributed generation adoption, broader decarbonization. Scott, over to you, like make the case.

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Oh, great. Well, it’s certainly a big topic and certainly, myself personally, why I’m in the business I am and grid X from a mission perspective really want to be a part of the decarbonizing our industry and contributing to the clean energy transition that’s going on.

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So we think about this a lot and we work with utility clients primarily and we monitor what they’re trying to accomplish and for very many of them whether it’s because their state is mandated or their CEO has made the claim have sort of net 0 targets, decarbonization goals, electrification goals.

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In particular with respect to decarbonization to achieve those goals we see those utilities often list out if you go to their website you’ll see you know where you have a net 0 goal by 2030 2040 2050 And the way we’re gonna get there is essentially by taking the carbon out of the electrons that they provide to their customers.

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So that means retiring coal plants and other fossil fuel plants. And replacing them with, usually renewable and distributed energy resources, then that’s great.

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That has to be done, of course. But what that means is that the supply, the way we supply energy is going to fundamentally change.

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We used to have grid operators who had knobs and dials to turn up and down power plants as demand changed throughout the day.

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Well, you don’t necessarily get that luxury with wind and solar or resources that are behind the meter that customers own.

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And so to be able to be a effective in getting to a net 0 target. To manage the grid in a situation where you don’t have control over the supply of energy in the way that the industry has had for a hundred years, now you have to have as a grid operator control over demand in a way that you’ve never done.

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And what does demand respond to? One of the things, prices, rates, business models. And so rates and everything we’re going to talk about today are just fundamental to making this shift happen to taking carbon out of the supply of energy will only work if grid operators have the flexibility with respect to demand to meet this new supply of stack that that utilities are building, some of them faster than others.

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And so that is why, getting rates right, having the right incentives

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So I might make your case. Obviously you’ve built your career around studying the impact of price on in energy markets and the energy transition, but why is this so fundamental to the clean energy transition?

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It’s human nature. Price matters. Whether you’re shopping for grocery, you have to decide should it be safe fair should it be Costco.

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You have happy hour pricing at restaurants. You have matinee pricing at movie theaters. You have a lot of variation in airline prices depending on it is the V can.

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Is it a key holiday event? So we are all as human beings ultimately responding to prices, whether it’s electricity or not electricity.

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That the same rule applies. So of course when it comes to electricity for all the reasons this God just mentioned the energy transition, the net 0.

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Electrification, all of those are laudable goals, essential goals I might add. As a planet and as a community, we are all trying to bring them about, but we can’t just do them sitting at the ISO or the utility or the commission.

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We have to do something that gets the customers to cooperate with us without customer involvement. This and that 0 business is dead on arrival.

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So we need to have customers be happily participating. We can’t have them be unhappy. We can’t let them think, oh, we are being forced like in a communist regime to do certain things that he otherwise wouldn’t do.

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It has to be shown to be in their own interest. So how do we do that? We make it less expensive to charge your electric car when the grid has extra capacity and we made it more expensive to charge it.

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We don’t prohibit it, they can still charge it, but they’ll pay more so we get the price it, but they’ll pay more so we get the price signal.

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To the customers and we let them respond like they do for any other commodity. All we are doing is, you know, electricity.

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I is obviously an expensive commodity and it has time of day variation. No doubt about that.

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There are many, many studies on that. So, but we have never thought about conveying that time.

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Sensitivity to customers for a hundred years. Is only in the last several decades. That we have started thinking about it and the meters as you mentioned make it really possible now in the websites the apps etc all of those facilitated but ultimately the signal has to get to the customer.

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And so that’s where time varying rates come in. Suddenly, they are now a hot topic of discussion justifying this webinar, for example, 5 years ago, you would have had a webinar with 10 people signed up.

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Now you have more than 400 people signed up. It is becoming The Talk of the Town

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It sure is. And, people get fired up when, when you have a conversation like this.

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So I want to start by maybe poking a little bit and, and, and we’re going to get into design and implementation, but If we step back and get like maybe your most provocative take, I’d like to hear from each of you.

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If you have something particularly provocative that you think about rates, you know, what is your most provocative take, Scott?

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Yeah.

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Well, I wish I was described as provocative more often, but I will do my best here.

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I think, and you know, I was thinking, you know, rates have been talking about for hundreds of years.

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So can I come up with a new and interesting take on rates that I haven’t been? But I do think, hopefully this is provocative, I think that rates are both going to get much more complex and much more simple.

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I think what’s going to happen ultimately is you will have some dis intermediaries or what they’re called aggregation service providers, ASPs that will be sophisticated enough.

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To work with business models that are much more complex today. Will at some point today we’ll talk about these dynamic prices and things like that that are very complicated for typical humans who don’t pay attention to their bills, they’ll get that.

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But they’ll be figure out a way to manage the risk around those complexities of the rapes maybe through a trade-off with customers to allow them to control when they charge their EV or or or move their thermostat around and those customers may want a very simple rate.

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Just give me a subscription to a Netflix type rate and the disintermediator will be able to work with that complexity, manage the risk and offer us very simple product to customers.

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So I think I don’t I think there’ll be a wide variety of rates out there but one of the trends I really believe is we’ll have both more complex and more simple rates.

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I might give us your spiciest take.

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So we have seen a lot of interesting attempts to innovate rates over the last 2 decades. And a lot of them unfortunately fought in the category of doing a check list.

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Oh, we’re going to offer a time of use rate, but we don’t know how to design it properly to customers going to get excited about it.

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We don’t know how to market it. And so most of these rates have had one or 2% of the customer signed up.

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But yeah, the commission is happy. There is a time of use rate. The utility says, yes, I met the commission requirements.

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So we have to get out of that. And really look at examples of other industries. And now within our own industry there are many successful examples of innovative rates being offered and attracting large numbers of customers.

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And of course the other element is technology. No, the challenge here, the provocative angle here, is we have to do it in a way that appeals to customers.

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We can’t become ourbellion and suddenly we come paternalistic and tell them how to live their life.

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We have to talk to them, listen to them and design rates that work with each person’s individual lifestyle.

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I think that is the challenge. And that’s where a few have succeeded and many are just not aware of what to do or what not to do.

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A lot of rate design experts at utilities honestly are engineers or accountants. They have very little contact with customers and the same is true of commissions.

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This hit in a room in an echo chamber and they make up the rates and then they wonder why only 10 people have taken it.

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Oftentimes I ask. Them those people themselves who have designed them are you on that rate they say no why would we want to be on that raid so where do you go right I mean it’s sort of like It is a trap.

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We have to get out of that trap.

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And I just wanna get some terms right here to inform the rest of the conversation. Ahmad quickly, when we talk about, we’re talking about time varying rates, so we use time of use and dynamic rates.

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Can you just talk about the differences in those terms?

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Yeah, sure. So a time of use rate simply says It’ll cost more during certain hours. And it will cost less during other hours.

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You will know the prices in advance. You will know the time periods of the buckets in advance. It’s kind of static.

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It does vary by time, but it’s the same rate being repeated day after day. It might change the summer versus winter, but otherwise it is well known in advance.

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On the other hand, a dynamic pricing rate, you don’t know what the price will be in advance, and you don’t know when that price will apply.

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So Dynamic introduces a lot of uncertainty. That you didn’t have in a standard time of use rate.

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Scott, what is the problem that you’re trying to solve? So more and more people are paying attention to this, particularly time of use rates.

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Like, what are the sources of conflict? What are the sources of issues that utilities are facing?

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And what does it mean to like modernize rate design?

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A lot of good questions there. Well, Hopefully in terms of the problem. I made a credible argument about how we need to create demand flexibility to support decarbonization.

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And so that demand flexibility is I think are greed on, you know, can be driven for or should be driven by price signals.

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That’s what gets to react to things, certainly residential customers as well as commercial industrial customers will react to those.

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Price signals. And so if we say that’s where we have to go to reach our targets, that’s the problem.

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The problem relates to that. It’s the inertia, it’s the very difficult nature of getting people to change both residential customers who you know ultimately I believe don’t think they’re buying electrons from their utility they’re buying convenience I come home I turn on my lights I turn on my air conditioner it works they’re not thinking about how much am I paying for those electrons at all times. So how do we get that?

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A lot of customers who don’t think about the energy transition or decarbonization to think about price signals for what the otherwise generally think of as a convenience that they’re buying from their utility, much like other services.

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Certainly a big challenge and then you think about large industrial customers who’ve maybe built their whole processes and the way their business works around electricity rates that exist today because electricity is a very high cost of them doing business.

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So how do we suddenly approach them and tell they need to change or make investments in their manufacturing process to respond to these pricing.

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So these are very real challenges that we have to deal with. But as a society, if we decide that clean energy and decarbonization is important, it’s we have to figure out ways to work through that.

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And as I’m out of certainly alluding to, how do we create really good customer experiences around managing that change, finding ways that either to tell the story to customers or make it obvious for them that there are benefits in making these changes and being more aware of price differences and those kinds of things.

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And certainly the utility is is responsible to the extent they they the commission will allow them to educate and engage with customers in a way that helps them understand this but that certainly is the the big challenge and the problem I think we’re dealing with is a system that’s been in place with relatively little change as a MoD, alluded to for the decades and decades.

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And so, so figuring that out. Terms of your question around modernization, and then I’m happy to let, amount, comment more on this.

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I think the to me, I have a low threshold, which is the purpose of rate design historically has been to figure out how do we get the price correct to allow the utility to recover its cost of service.

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It’s a very strange industry we work in where the market doesn’t set the price. The utility says this is how much it cost me to operate my utility plus a return on capital and we have to spread all those costs around our customers and that spreading that cost around customers was the rate design function.

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But of course, now we’re thinking about rate design differently. How do we incentivize certain behavior?

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How do we this load flexibility. So anything that is a shift from that traditional more accounting, math-based exercise of rate design, I would consider to be modern rate design, but Ahmed’s been in the industry longer than he may have a different definition.

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You know, I think you summed it up very well. I’ll make just 3 comments. One is Redesign traditionally has been driven by cast of service.

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Cost of service has been accounting financial kind of exercise. There was no intention to change customer behavior. It was simply here is what it cost.

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Well, because of the energy transition, because of the net 0 goals and the desire for load flexibility, we now have new way of thinking about the role prices can play.

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Now as far as customers go, some of them are green. Some of them are into climate change. But currently most of them are not.

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Most of them are simply about how do I lower my bill and how do I live my life as I want to live it.

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So we have to find different ways of messaging the need for change to the different segments. And it all begins with customer centricity.

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Red design used to be cost of service driven, now it has to be customer centric. And that is where these aggregators that Scott was mentioning come in.

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They understand this better than utilities or regulatory commissions. And that’s why they have entered the market in England.

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In Australia and New Zealand in Texas, you were seeing companies like octopus energy like ovoo, like Kavela.

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These companies Understand customers a hundred times better than regulated utilities. They have come in from the outside.

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They know how to talk and communicate to customers and do the pricing in a way that the customer says, oh, I see this will lower my bill, or oh, I’m going to help in greening the planet.

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The messaging is as important as the rate design. You can have the best rate design and have terrible marketing and nobody will take it.

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You go to another utility with the same rate design, they know how to market it, or you go to octopus energy, a 3rd party, and that messaging.

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I mean, just think of it like this all retail business in the United States without advertising and marketing. Where would it be?

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It would be dead on arrival. It’s they have to know how to talk in a language the customer can relate to.

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And that is something we are really in most regulatory jurisdictions. We have what I’m going to call regulatory speak.

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Only the regulator. And the utility and the witnesses in the hearing room understand each other. The customers, if they were led into that room, would immediately rush out.

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Oh, this is like a mad asylum. Why was I put in here?

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Let’s get into rate design and then we’ll get deeper into implementation. So, you know, one of the criticisms of time of use rates is that they don’t make a big enough difference to justify the effort and I’d like to get your thoughts on whether simple time of use rates actually achieve desired outcomes and if there are any successful programs you can point to where the you know they actually worked.

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Scott, you want to start?

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Yeah, I like this question a lot. I, you know, we get asked. for a lot of these conferences and trade shows to come up with panel ideas.

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And I, I think we could do a whole panel just on debating what does that mean, success of a time of use rate.

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I’m gonna alluded to you, we do a rate case. There’s all kinds of stakeholders that get involved.

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And I think, each of those stakeholders may have a different perspective on what is a successful time of use rate.

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So I will give mine, but I recognize that depending on what your role is and how your in this whether you’re a consumer advocate, a regulator, the utility, a customer, all of those people may think all those personas if we want to call that may look at these programs differently to measure success.

00:25:26.000 –> 00:25:39.000
I think about it, I think that the base level, the reason we went down, one of the big reasons we went down the path of putting in smart meters to enable time of use pricing is because everybody recognize that having high peaks at the utility.

00:25:39.000 –> 00:26:03.000
Generates extra costs for the whole system that everyone has to bear, you know, it’s having a peak plant that runs 10 HA year but costs you know millions of dollars that everyone has to pay for is something if we could avoid through time abuse rates that it pushed that off peak load onto or cheating on people load it to off peaks could shave that peak we could save money for everybody across the system.

00:26:03.000 –> 00:26:20.000
So for me the baseline is was the TOU program successful at lowering the peak shaving the peak, reducing the need to invest in what we’re often, you know, dirty fossil plants that serve those a few hours a year.

00:26:20.000 –> 00:26:33.000
Ahmed has through his work with his prior company has hundreds and hundreds of TLU programs, almost all of which have shown that TLU does push load from on peak to off peak.

00:26:33.000 –> 00:26:41.000
So I think we there’s ample indication that that it works. I think the question becomes to what extent does it work?

00:26:41.000 –> 00:26:45.000
Some people when they hear TOU rates and they they find that a utility is investing and rolling them out.

00:26:45.000 –> 00:26:52.000
They think that’s a proxy for solving all the problems. Well, we know TLU rates won’t solve all the problems.

00:26:52.000 –> 00:26:53.000
In fact, we believe that I believe there’s going to have to be a menu of rates and options in business models that fully.

00:26:53.000 –> 00:27:05.000
Reduce the peak. The question I think is does the TLU program meet just a basic cost benefit ratio is these are generally lower cost demand side programs than say demand.

00:27:05.000 –> 00:27:24.000
Response or maybe some energy efficiency. Other programs TLU is relatively low to cost to implement and that price signal can have really strong results.

00:27:24.000 –> 00:27:25.000
Yeah, let

00:27:25.000 –> 00:27:30.000
And I don’t know if you’re gonna ask me about particular programs or particular utilities. I can hold off on that for a minute if you want to let Ahmed respond to anything I said or I could go into a few examples.

00:27:30.000 –> 00:27:37.000
Sure, I might if you want to just sort of talk broadly and then I want to get both of your takes on specific utility programs that have actually worked.

00:27:37.000 –> 00:27:44.000
So basically the success. Off a time of use rate or any kind of time varying rate including dynamic pricing rate.

00:27:44.000 –> 00:27:58.000
Depends on how much of a savings opportunity does it create for customers. Is it enough to motivate them to move their load from peak to off peak or to build a new offbeat load like buying an electric car?

00:27:58.000 –> 00:27:59.000
If the rate is not well designed, if it’s very diluted, it’s just the time of use rate in theory.

00:27:59.000 –> 00:28:14.000
The peak rate is just 20% higher than the offbeat rate or look at it the other way the offbeat rate is just 20% lower than the peak grade. Nothing happens.

00:28:14.000 –> 00:28:22.000
It has to be substantially lower. The data that Scott was referring to that I had developed in my previous career.

00:28:22.000 –> 00:28:33.000
We had data from 400 implementations of time varying rates across the globe. And what we found was that the bigger the savings opportunity, the more will be the reduction in peak load.

00:28:33.000 –> 00:28:39.000
Now that sounds like common sense and it is common sense, but it’s empirically validated.

00:28:39.000 –> 00:28:40.000
It’s not just a theory in a classroom that a professor is teaching. It is actual consumer behavior.

00:28:40.000 –> 00:28:51.000
So if you’re only going to lower your offbeat rate by 20%, you’re going to get not much reduction in peak.

00:28:51.000 –> 00:28:58.000
But if you lower it by 80%, you will get a much substantial, much more substantial reduction in P.

00:28:58.000 –> 00:29:05.000
So the price signal. Has to create a savings opportunity. And that’s where you see successes and failures.

00:29:05.000 –> 00:29:14.000
Part of it is rate design. The other part is marketing. Both are equally important. As I said, you can have the best rate design and market it poorly and nobody will take it.

00:29:14.000 –> 00:29:39.000
And you can have divorce rate design and market it effectively and everyone will take it. There’s a sucker born every minute as the saying goes right so what you need to do is combine good rate design with substantial savings opportunities with excellent marketing and then I would think maybe in your next question I’ll give you my favorite examples of successful utilities and Maybe we should let Scott go 1st on that.

00:29:39.000 –> 00:29:50.000
Well, yeah, I was gonna say, I mean, I think that really interesting this idea of the on peak and off peak price, really is one of the things that drives so much passion around time of use rates, really is one of the things that drives so much passion around time of use rates.

00:29:50.000 –> 00:29:51.000
I’m sure you’ve seen it as well. And, you know, in our industry, we are so worried about customers bills goes up.

00:29:51.000 –> 00:30:00.000
Everybody was involved for regulators, the utilities, the customer advocates. And rightly so, we should be worried.

00:30:00.000 –> 00:30:09.000
I mean, the goal of this is not to create higher bills. And that can that fear can drive sometimes rate design decisions.

00:30:09.000 –> 00:30:24.000
I’m sure a MoD has been a part of many of these where you know the people walk into the rate case with high hopes and then they get afraid by the end and they decide to go with high hopes and then they get afraid by the end and they decide to go with a differential that’s too small to make much of a difference.

00:30:24.000 –> 00:30:49.000
I think that’s 1 of the US about the problem earlier. I think this is part of the challenges, you know, how bold do we want to be as regulators, utilities, customer advocates to say that will risk customers bills going up in exchange for providing a price signal that may ultimately provide them more opportunity to control their bill and lower it but I just think that’s that’s interesting.

00:30:49.000 –> 00:30:51.000
So I’m on that on peaked off peak ratio.

00:30:51.000 –> 00:30:52.000
All right, so let’s talk about examples.

00:30:52.000 –> 00:30:59.000
Yeah, if I can add just a footnote to what Scott was just saying, it reminded me on an example where I was trying to describe a dynamic price.

00:30:59.000 –> 00:31:04.000
To a utility client. He was a vice president and there was a root number of other people in the room.

00:31:04.000 –> 00:31:12.000
With a dynamic price like critical peak pricing for a few hours of the year the price will rise a lot but it’s lower during all of the other hours.

00:31:12.000 –> 00:31:25.000
So in this example the price was going to rise to one dollars for a hundred hours of the year but it’ll go down by a lot during all the other hours and I was presenting this to him and he suddenly said why don’t you just shoot the customer?

00:31:25.000 –> 00:31:30.000
I was taken aback. 1st of all, I think it’s a crime and secondly is not my custom, it’s his customer.

00:31:30.000 –> 00:31:38.000
I said, and I don’t have a gun and it’s your customer anyway. But I did say to him that look we’re lowering the offbeat rate on average it will be the same rate if they don’t shift anything.

00:31:38.000 –> 00:31:47.000
He said, oh, I don’t care about what you’re saying. I’m concerned about not charging a price.

00:31:47.000 –> 00:31:55.000
So some people get fixated on the high price and that’s understandable. Now if you go to Macy’s or Nordstrom when they have their sale, They only talk about the lower price.

00:31:55.000 –> 00:31:57.000
Everything is on sale. 70% off. People rush. They don’t say that on the other days we have a higher price.

00:31:57.000 –> 00:32:10.000
Why? Why lead with the higher price? Lead with the lower price. I mean that’s like marketing one a, right?

00:32:10.000 –> 00:32:25.000
But we somehow because of the cost of service mindset can’t seem to understand it, but all of us are customers who go to Macy’s Nordstrom’s in safety, learn from that everyday experience and talk in the language of savings and not penalizing the customer.

00:32:25.000 –> 00:32:36.000
So you gave me an example of poor design or implementation. So let’s actually. Step back and when we give some examples here, give me an example of.

00:32:36.000 –> 00:32:46.000
Good design and implementation. An example of poor design implementation and why Scott you first.st

00:32:46.000 –> 00:32:47.000
Well, one of the 1st customers we worked with was the Sacramento Municipal Utility District.

00:32:47.000 –> 00:32:50.000
Most people know them as smart. They did some, really interesting pilots. They were early to pilot.

00:32:50.000 –> 00:33:02.000
They they pilot a number of different programs including the CPP as a MoD just referred to they really gathered some interesting data about the price elasticity of their customers.

00:33:02.000 –> 00:33:14.000
And they looked at different on peak to off peak ratios and had opt-in and opt-out pilots.

00:33:14.000 –> 00:33:33.000
So really develop some really good information about their customers about a good set of their customers and then became one of the 1st real, you know, good sized utilities that moved to a default opt-out time of day model and as they approached that their board made the decision to go down that path.

00:33:33.000 –> 00:33:40.000
They had good results from, from their pilot programs. They really invested heavily in, in marketing, education, outreach.

00:33:40.000 –> 00:33:48.000
And helping customers be ready for the transition. I live in the San Francisco Bay Area, not too far from Sacramento.

00:33:48.000 –> 00:34:02.000
They were a customer. I’d be driving up there, quite frequently and they just blanketed the whole and they really invested in helping their customers be knowledgeable in particular they plastered everywhere 5 to 8 that was their their peak period 5 to 8 and so they did benefit for those other utilities out there who have very large service territories.

00:34:02.000 –> 00:34:32.000
This could be a little harder. They certainly benefited from the fact that they had more of a smaller service territory more concentrated, but they did this you know given that they did a really fantastic job and they’ve achieved both a load shift that they were hoping for and I you know note they are very acclaimed for their high customer satisfaction ratings and JD power scores and that has not been impacted by defaulting all of their customers to

00:34:33.000 –> 00:34:40.000
this new time of use rate. In fact, they’ve stayed very high across all of those. So that’s certainly a really good example.

00:34:40.000 –> 00:34:45.000
And what about port, or roll out?

00:34:45.000 –> 00:34:46.000
Oh!

00:34:46.000 –> 00:34:47.000
Well, boy, we have to call, people out. I think.

00:34:47.000 –> 00:34:50.000
Oh, we’ll decide. You can decide whether you name names or not.

00:34:50.000 –> 00:35:02.000
I well I will say this so we do monitor things like the EIA databases which track how many customers have access to time of use rates and how many are enrolled.

00:35:02.000 –> 00:35:13.000
So we know just across the country that today well over 60% of customers could be enrolled in a time to use rate, but if there’s only about 7 or less than 10% are enrolled.

00:35:13.000 –> 00:35:19.000
That sort of is an indictment of our industry and we have with our data across our customers we know that many of these customers would benefit just by switching to the to the rate based on their load shape.

00:35:19.000 –> 00:35:38.000
But yet they don’t. So that’s almost an indictment of our industry at large. And I think the the reason that these programs fail, we’ve already talked on a bunch of, as mentioned, in some cases the price differential just not enough to get people to care about.

00:35:38.000 –> 00:35:46.000
And so the, the, it’s not maybe not worth the time to do a phone call or log into the website because the it’s not maybe not worth the time to do a phone call or log into the website because the bill savings are not that much differently.

00:35:46.000 –> 00:36:03.000
The marketing is not there to raise the awareness among the customers that they should even be thinking about this. They they just think there’s 1 price they don’t even know the rates available.

00:36:03.000 –> 00:36:04.000
Okay.

00:36:04.000 –> 00:36:05.000
For not to name names because I hope all of these we can help. It one day but create successful time of use programs.

00:36:05.000 –> 00:36:11.000
Some of them, you know, again, maybe their commission has not provided them funding. To be effective marketers of these campaigns.

00:36:11.000 –> 00:36:13.000
So it has to be some recognition from regulators as well that this is to make a great customer experience.

00:36:13.000 –> 00:36:26.000
It that you can’t just offer a rate it has to be marketed as well as I’m going to said.

00:36:26.000 –> 00:36:27.000
Yeah.

00:36:27.000 –> 00:36:31.000
So I will pass on the specifics, Stephen, maybe after we turn the microphone off, we can have a longer conversation.

00:36:31.000 –> 00:36:37.000
Yes, sometimes the better conversations are the one in the in the bar next to the conference, so to speak.

00:36:37.000 –> 00:36:45.000
But, Amy, you’re recently retired, so you know, maybe you can feel free to actually name names, but it’s just, I would love to hear your thoughts on.

00:36:45.000 –> 00:36:51.000
Good and bad example, some specific experiences that you’ve been through.

00:36:51.000 –> 00:36:59.000
I should probably write a book on the subject, right? The question is, will anyone read it? Okay, so I’ll I’ll give you a few examples.

00:36:59.000 –> 00:37:07.000
Smart definitely number one on my list in so many areas. They did it gradually. They began with the pilot.

00:37:07.000 –> 00:37:18.000
Then they did an opt-in, then they did a massive education campaign whenever I would drive to Sacramento for a conference or whatever on the freeway I would see billboards with the signs that Scott was referring to.

00:37:18.000 –> 00:37:26.000
They did it gradually and their rate is very well developed. The price differential between the 3 periods peaked to half week in the summer.

00:37:26.000 –> 00:37:37.000
Is 2 and a half times. In other words, you save a lot during the off peak period. I wish they had marketed that way, but they chose to do not do it that way.

00:37:37.000 –> 00:37:38.000
But again, everybody can learn and improve. Again, look at Macy’s in Nordstrom.

00:37:38.000 –> 00:37:49.000
Nobody pitches the high price. They always talk about the lower price. But despite all of that, they have 97% of the customers on their default TO.

00:37:49.000 –> 00:38:00.000
Okay. Peak reduction of 4 to 8% has occurred which is very consistent with our database. Besides mud, and let me mention 2 other examples, good ones, and then I’ll mention a few others.

00:38:00.000 –> 00:38:08.000
So Oklahoma gas and electric, very similar pathway to smuds, but their focus was on critical peak pricing.

00:38:08.000 –> 00:38:19.000
Not time of use. They also have time of views, but they wanted a more dynamic response. And so They did a lot of market research, then they designed the rate.

00:38:19.000 –> 00:38:27.000
Then they tested it in a pilot and then they offered it. 10% of the customers are on it, which looks like a small number.

00:38:27.000 –> 00:38:37.000
But those 10% who are on it have opted into it. And they have reduced their peak load by 40% because the price really rises.

00:38:37.000 –> 00:38:49.000
And they are saving 20% individually. So that is a very successful opt-in program and I have talked to them about doing opt-out but they keep saying it’s Oklahoma, Oklahoma, you do not do opt out.

00:38:49.000 –> 00:38:55.000
Okay, that’s fine. I understand. Then Maryland is another example of success with peak time rebates.

00:38:55.000 –> 00:38:57.000
I was part of that process. We helped design a pilot. We tested it, we looked at tier you, we looked at CPP, we looked at peak time rebates.

00:38:57.000 –> 00:39:10.000
The peak time rebate the price doesn’t go up. But you can earn a rebate if you lower your peak.

00:39:10.000 –> 00:39:17.000
So it’s more customer friendly, so to speak. And then the commission decided with the utilities.

00:39:17.000 –> 00:39:27.000
Application to have default offerings every customer. Is automatically enrolled in the peak time rebate and I believe more than 80% of them are actively participating.

00:39:27.000 –> 00:39:31.000
This is true for both Baltimore gas and electric as well as pepkill. So those are 2 of many examples.

00:39:31.000 –> 00:39:44.000
Now you have in the state of Michigan. You have it today of Colorado. They’re all going to default time views rates and so far so good.

00:39:44.000 –> 00:39:52.000
And actually in Fort Collins, Colorado, which is a small municipal utility, I think with 50,000 customers, they actually have mandatory time of use rates.

00:39:52.000 –> 00:40:00.000
Not just default but mandatory and it’s been fine. Now to mention a few of the ones that didn’t quite make it.

00:40:00.000 –> 00:40:08.000
And I won’t mention names. I think everyone knows who they are. So one of them was in the northwest, the Pacific Northwest.

00:40:08.000 –> 00:40:13.000
And around the time of the California enemy crisis they decided oh yeah let’s offer time of use rates as the default to all customers who have a smart.

00:40:13.000 –> 00:40:24.000
Meter they had 300,000 out of a million who had the smart meter. So then what they did was they went ahead and rolled it out.

00:40:24.000 –> 00:40:36.000
But the price differential was tiny. It was 15%. However, the marketing was very intense. And so people were excited and they were shifting their load like crazy.

00:40:36.000 –> 00:40:43.000
Well, a year went by and then somebody said have you saved anything or not? They didn’t know this was 20 years ago.

00:40:43.000 –> 00:40:51.000
So then a special analysis was run and it showed that Yes, some people saved a little bit, some people lost a little bit, but nothing really changed.

00:40:51.000 –> 00:41:08.000
Then there was a public outquire. And The utility was forced to just shut it down. That failure was noticed around the country and many other utilities like the ones in Minnesota, etc, that were planning to go down their path, suddenly stopped.

00:41:08.000 –> 00:41:15.000
The good news is that 20 years later the same utility with new staff and a new commitment decided to look at more appealing time of use rates and I was part of their project.

00:41:15.000 –> 00:41:30.000
We helped design a pilot with much more significant price regionals. The pilot was very successful, it has been rolled out.

00:41:30.000 –> 00:41:38.000
I guess it has been rolled out. The collaborative was very successful. I don’t know the results yet, but I know some people who are on that pilot and they’re quite excited.

00:41:38.000 –> 00:41:51.000
About being on that rate. And there are numerous examples of failures in the country where the rate was either had no savings opportunity or the peak period was too long.

00:41:51.000 –> 00:42:00.000
It was 12 h long. It was basically all the daylight hours. You screwed, right? And so why would anybody want to be voluntarily?

00:42:00.000 –> 00:42:11.000
Screwed, so to speak. And so long peak periods, insufficient price differential and bad marketing, those are the hallmarks of failure.

00:42:11.000 –> 00:42:12.000
Even.

00:42:12.000 –> 00:42:20.000
Quick follow up here from someone who asks this is a question for both of you. I think did the utility benefit.

00:42:20.000 –> 00:42:25.000
From these successful programs like how does the utility and the customer benefit and some of these cases.

00:42:25.000 –> 00:42:31.000
It has to be a van win, right, as God indicated peak load when it goes down, which is the purpose of the rates.

00:42:31.000 –> 00:42:39.000
It helps the utility avoid investing in expensive assets that have a very low capacity factor. They’re used for 200 HA year.

00:42:39.000 –> 00:42:44.000
So that that’s the primary benefit, but then Scott, why don’t you elaborate on some of the others?

00:42:44.000 –> 00:43:00.000
Oh yeah, thanks. Yeah, I’m glad you asked that question because I It felt like a little bit also of Sophie’s choice here question when you asked me to pick out some successful ones and we’ve had the benefit and a real good fortune of working with a bunch of utilities that I thought have really put their blood sweat and tears and everything they had into making their TLU programs as well work out really well.

00:43:00.000 –> 00:43:15.000
So I didn’t want to, omission of clients I worked with to be, indictment of the work they’ve done, but I thought also to be inspirational and to answer this question, a couple of other examples might might be worthwhile.

00:43:15.000 –> 00:43:37.000
Certainly PSEG on Long Island is in the process of moving from an opt-in pilot to a default time of day program, but that one of the reasons they’re doing that they found in the opt in program, they sort of got what I call the Holy Grail, which is they realized system benefits.

00:43:37.000 –> 00:43:53.000
They had the peak shifting we’ve been talking about and at the same time they had bill reduction so customers benefited and the system and so that’s really if you can achieve both of those you really hit the holy grail for, what you want a TLU program to do.

00:43:53.000 –> 00:43:59.000
And so really excited as they move to roll that out to their whole population. Little tempered and an opt in pilot because customers may be self-selecting.

00:43:59.000 –> 00:44:12.000
They may be the ones who are most flexible. So we’ll see how that goes. But early indications are that they found a rate design that works for customers and for the system.

00:44:12.000 –> 00:44:13.000
That’s really exciting. Southern California Edison, we worked with, they measured on one peak day, we worked with, they measured on one peak day the price signal to, time of use customers.

00:44:13.000 –> 00:44:25.000
This is one peak day, the price signal to, they measured on one peak day, the price signal to, time of use customers.

00:44:25.000 –> 00:44:38.000
This is one of the heat storms in California in August, September, I think of 2022, but they measured 75 megawatts of load reduction just you know millions of customers at one and 2 kilowatt hours, you know, adds up. I guess I hope that math works.

00:44:38.000 –> 00:44:42.000
Maybe it’s more than that. But, and that was equivalent to the 3rd largest demand response program.

00:44:42.000 –> 00:44:56.000
So another example, a really successful, implementation of time and use rates. That was an opt out program and then, the PG and E, one other quick example that, slightly different than this.

00:44:56.000 –> 00:45:04.000
They have a new electrification rate that they’ve been promoting for customers that have EVs and other E, electrification choices they’ve made.

00:45:04.000 –> 00:45:12.000
What we’ve seen on that rate is the on peak off peak is very extreme for these. Those customers have been able to increase their usage.

00:45:12.000 –> 00:45:20.000
We’re talking a lot about lowering usage, lowering peak. These are customers who are increasing in off-peak periods, yet they’re also seeing bill reductions and this is across customer class.

00:45:20.000 –> 00:45:30.000
I think it’s really exciting. We’re seeing this also in low income customers where people are often particularly worried about those customers and how they are impacted by things like changing the rate structure at a time of use.

00:45:30.000 –> 00:45:42.000
So lots of really good examples out there. I hope the people who are listening who are thinking about this know that there are a lot of successes out there.

00:45:42.000 –> 00:45:53.000
Yeah, and that example that you just gave brings us to a bigger question about the broader menu of options, you said that that menu is getting bigger.

00:45:53.000 –> 00:45:58.000
So if we go beyond the time of use rates, we’ve been. Talking about. Have some questions in here about virtual power plants.

00:45:58.000 –> 00:46:16.000
You mentioned electrification and electric vehicles specifically. If we think about Distributed resource adoption, managing electric vehicles, home electrification, shifting peaks, how is that menu of options?

00:46:16.000 –> 00:46:21.000
Changing. Ahmad, you want to start?

00:46:21.000 –> 00:46:31.000
Yeah, I guess I saw that question flash up. So the virtual power plans essentially. Or about load flexibility.

00:46:31.000 –> 00:46:40.000
And in some cases, they’re also about sending power back to the grid. So if people have batteries, like stationary batteries, they have solar panels and stationary batteries.

00:46:40.000 –> 00:46:48.000
Then if you give them the right incentive that you will pay them a good sum of money on September, the 6th of 2,022 and we have that.

00:46:48.000 –> 00:46:55.000
I will arm fire and all of us were getting those messages on our phones from the ISO and the governor.

00:46:55.000 –> 00:47:09.000
If if you have more people with batteries and today the primary batteries I’m thinking of are stationary batteries but this talk as you know about electric car batteries being potentially part of their portfolio.

00:47:09.000 –> 00:47:16.000
And the electric car batteries could be 70 kilowatt hours as opposed to the home battery which is let’s say 10 kilowatt hours.

00:47:16.000 –> 00:47:29.000
So if those batteries are given an incentive by the grid. To send power back to the grid during critical days, critical hours on critical days, they become a virtual power plant and that could be a huge resource.

00:47:29.000 –> 00:47:36.000
So that’s where. Right now the way the incentives are structured, it is a peak time rebate.

00:47:36.000 –> 00:47:41.000
You send your power and you have paid for that. It is not the dynamic price of the traditional kind.

00:47:41.000 –> 00:47:56.000
But the dynamic prices of the traditional kind also makes a big role because you lower your air conditioner usage, you don’t charge your electric car when that there is that special, you know, alert, what is it called zodiac alert?

00:47:56.000 –> 00:47:57.000
What is the term that’s used when this end those when they ping your phone? So some kind of alert is sent.

00:47:57.000 –> 00:48:06.000
Well, if you can also have higher prices as opposed to just sending an alert. See the problem with alerts is the only work a few times.

00:48:06.000 –> 00:48:16.000
And then it’s like the, you know, the kid who cried both doesn’t have an impact.

00:48:16.000 –> 00:48:30.000
You have to make it tangible by giving them a monetary payment or charging a higher price. So variable peak pricing and demand response programs both are part of this portfolio of what is a virtual Power plant.

00:48:30.000 –> 00:48:38.000
And it It will require technology advancements. It has to go beyond just a smart thermostat. And I think we are beginning to see that happen.

00:48:38.000 –> 00:48:47.000
In the next few years, there will be a lot of batteries in California at least with the NEM at 3.0 proceedings and more and more electric cars.

00:48:47.000 –> 00:48:53.000
I mean I was at a gathering yesterday in the parking lot I was just looking at the cars half of them were EVs.

00:48:53.000 –> 00:48:56.000
I know the Bay Area is very unique in that. But it’s a trend that’s coming nationally.

00:48:56.000 –> 00:49:07.000
And just think if they all charge the cars at the wrong time, it will be a disaster. But if they all charge them at the right time, they It will be very successful.

00:49:07.000 –> 00:49:12.000
So how do we make sure people don’t charge the wrong time? Use the price signal.

00:49:12.000 –> 00:49:15.000
Absolutely. So Scott, over to you. How is that menu? Changing.

00:49:15.000 –> 00:49:16.000
Yeah, well, that’s, you know, that brings up a really interesting example.

00:49:16.000 –> 00:49:33.000
I’m thinking about, you know, I’ve heard from some in certain corners, the really interesting corners maybe of rate design who say, you know, we shouldn’t have device specific rate designs because.

00:49:33.000 –> 00:49:37.000
We don’t know how many devices there will be, how many technologies there be and maybe we’re just going down a wrong path.

00:49:37.000 –> 00:49:44.000
I don’t know what the answer to that is. I think there we have some interesting history here to think about though.

00:49:44.000 –> 00:50:03.000
If we think about net metering, for example, and there’s a whole we could have a whole webinar in that meeting, but I just want to point out for solar adoption the combination of the time of use price signal with net metering meant particularly here in California where there was so much adoption, everybody had their solar panels facing south.

00:50:03.000 –> 00:50:15.000
And today that’s a little bit of a problem for the state now because we have over supply of solar electricity on many days of the spring and fall in particular around that 12 o’clock time.

00:50:15.000 –> 00:50:27.000
The rate design has changed now to incentivize West facing solar panels and obviously NEM 3 or MBT is encouraging storage to go along with that.

00:50:27.000 –> 00:50:54.000
But I think that is one of the things that hopefully we have smart people who have crystal balls who can see the future in ways that if we go down, technology specific rate designs, as Rama just said, that’s what I thought was a really good example for EVs, are we setting up challenges by having all millions of customers or hundreds of thousands today focused on activity that will create an externality some problem down the road and we

00:50:54.000 –> 00:51:14.000
certainly need to be aware of that. And so I think ultimately because of policy reasons. And, people who want to apply policy over economics and maybe some practicalities of managing the grid, we will see a more abundance of technology, specific rates and thinking about heat pumps, batteries.

00:51:14.000 –> 00:51:21.000
Certainly we have EV rates are quite ubiquitous at this point. So I think there’ll be an early trend.

00:51:21.000 –> 00:51:27.000
We may see something like the example I gave with solar panels all being, you know, face south today that we realize 2, 3, 5 years later, what we shouldn’t have done it will have to course correct.

00:51:27.000 –> 00:51:34.000
But, but it certainly seems to me that’s the path we’re going down.

00:51:34.000 –> 00:51:43.000
One comment if I can make just quickly technology-specific rates. Some people hate them and at the traditional utility mindset, it’s a no no.

00:51:43.000 –> 00:51:49.000
But I think we need to change our thinking. We have to look at the future, the energy transition and at 0.

00:51:49.000 –> 00:51:59.000
That requires us to encourage the desirable kind of electrification. So how do we do that? Well, what we do is we say, okay, this is your current pattern of consumption.

00:51:59.000 –> 00:52:09.000
This is your current bill. We can leave it just the way it is, but at the margin, if you electrify it through an or a heat pump or anything else.

00:52:09.000 –> 00:52:16.000
We will see the change in your loadship. The AI technology is there, the data science is there, the metering is there.

00:52:16.000 –> 00:52:30.000
And so your extra use, we’re going to charge that at a dynamic price. So you don’t have to panic about your existing lifestyle, your existing consumption, but at the margin you’ll get a much lower price most hours of the year.

00:52:30.000 –> 00:52:36.000
That will really incentivize the adoption of these much-needed heat pump and EV technologies.

00:52:36.000 –> 00:52:40.000
That’s an idea that I have been pushing and bringing up. And actually I’ve just copied something that Georgia Power has been doing for years for CNI customers.

00:52:40.000 –> 00:52:51.000
Their RTP program just applies at the margin. It doesn’t apply for the base usage.

00:52:51.000 –> 00:52:54.000
So you don’t have panic. Oh, my rates will go up. I don’t know what will happen to me.

00:52:54.000 –> 00:53:06.000
You just say. Use what you’re using efficiently as much as possible like you always have done, but at the margin will give you a much lower rate that encourages efficient electrification.

00:53:06.000 –> 00:53:12.000
And if you have time bearing elements in that, marginal cost base pricing, everyone’s better off.

00:53:12.000 –> 00:53:19.000
Now one comment I’ll make which came up earlier and didn’t get fully addressed. What is the issue that utilities have?

00:53:19.000 –> 00:53:29.000
The utilities issue is I will lose revenue. If everyone shifts their load and lowers their bills, by goodness my shareholders will hate it, I will be hanged.

00:53:29.000 –> 00:53:36.000
So what should I do? Then they have decoupling. But decoupling is good up to a point because basically you lower your bill and then they raise the rates so they get the same revenue.

00:53:36.000 –> 00:53:45.000
It’s like a shell game that doesn’t go anywhere. We have to change the revenue. It’s like a shell game that doesn’t go anywhere.

00:53:45.000 –> 00:53:47.000
We have to change the game that doesn’t go anywhere. We have to change the business model of the utilities.

00:53:47.000 –> 00:53:53.000
And that’s why you think these 3rd parties come in. We have to change the business model of the utilities. And that’s why you seeing these 3rd parties come in. They don’t have this crazy business model.

00:53:53.000 –> 00:54:01.000
That Now disintermediation is the term that Scott had used. That is a term I used 10 years ago and I was told I could not use that term.

00:54:01.000 –> 00:54:06.000
It was an Edison Electric Institute Conference and then the other term you can’t use dead spiral.

00:54:06.000 –> 00:54:21.000
We have to get out of this mindset of protecting the old business model we have to realize bitch change is coming for net 0 we have to have a new way of thinking not just for the customers but also for the commissions and the utilities

00:54:21.000 –> 00:54:37.000
We have some questions in the chat. That I’m going to try to lump together here. I think this brings us to a conversation about highly dynamic pricing, real-time pricing, and we have some folks who are sort of asking us to define dynamic pricing a little bit more and also a question about utility control of these assets.

00:54:37.000 –> 00:54:55.000
And so I think that the, you know, the longer term vision of many is to create a sort of price to device market where you’re using this highly dynamic real-time pricing and devices are.

00:54:55.000 –> 00:55:04.000
Automatically reacting to the pricing environment. And I would love for your abroad takes on if we are headed there.

00:55:04.000 –> 00:55:13.000
I know California has been considering this for a couple of years. What are the What are the steps to get there?

00:55:13.000 –> 00:55:19.000
Is that a desirable outcome? And what are potential pitfalls of that? So Scott, do you want to take that first? st

00:55:19.000 –> 00:55:37.000
Yeah, I think the desirable outcome again depends on your perspective who you are. I think if you are flexible load and so you, you run a business where you can respond or you’re even a residential customers who has the ability to respond to these price signals.

00:55:37.000 –> 00:55:43.000
Things like dynamic prices are a really great option for you where again, you get these win win outcomes. I think I’m odd.

00:55:43.000 –> 00:55:54.000
Alluded to before where the customer can save money potentially or at least not spend as much as they would have on the another rate or tariff and they provide system benefits.

00:55:54.000 –> 00:55:58.000
You know, if you think the duck curve is a California only thing, then maybe this won’t apply.

00:55:58.000 –> 00:56:20.000
But if you think the duck curve is at least that maybe it won’t be as pronounced in your state or your region, but there will be a real benefits to getting customers to take advantage of their flexibility and use energy when it’s cheap, it’s clean, it’s free, and so I certainly I think those are the all the reasons to do it the steps to take there’s a multitude of different rate

00:56:20.000 –> 00:56:29.000
designs I’m not mentioned what happens in Georgia slightly different than what’s happening here in California, but the idea is to provide a price signal that is more tied into the true cost of the energy that’s being used.

00:56:29.000 –> 00:56:44.000
Yeah, from a wholesale, whether that’s an ISO level, or some wholesale price signal, combined potentially with what’s happening locally at the circuit level on the distribution side.

00:56:44.000 –> 00:56:51.000
I think I saw some questions in here. Diving into that as well about how do we manage what’s going on at the distribution level, what might be happening at the generation level could be different than the needs of the distribution.

00:56:51.000 –> 00:57:00.000
And then you get into some real complex rate design. But it may be necessary. That may be the way we need to move to get to net 0.

00:57:00.000 –> 00:57:16.000
And the nice thing is whether we call them intermediaries or not, somebody can step in and manage that complexity for human customers because not many humans probably are going to want to think about hourly prices.

00:57:16.000 –> 00:57:21.000
But they can find agents for them that would be willing to manage that for a price. And that prices like insurance are just the cost of enrolling in a product.

00:57:21.000 –> 00:57:29.000
So I really bullish on this not because You and I, Stephen, want to know, look at our phone every day and see what the next hourly price is.

00:57:29.000 –> 00:57:40.000
But because somebody will be willing to manage that for us and offer us a product we really like.

00:57:40.000 –> 00:57:57.000
There are a lot of very strong opinions on this. Ahmad, I don’t want to mischaracterize you, but I think you’re a little bit less bullish on this you know real-time pricing maybe I mean there’s sort of a technological and standards component and then there’s the actual impact on on customers.

00:57:57.000 –> 00:58:03.000
So what’s your take on whether that is the design outcome?

00:58:03.000 –> 00:58:19.000
So I have mixed feelings. I certainly think that customers would like somebody else to manage their bill for them and lower it without their being inconvenienced that they lay out their lifestyle and a good example of that actually goes back a few years to Oklahoma again.

00:58:19.000 –> 00:58:27.000
They have prices through devices for 10 years now with their dynamic pricing program. What they do is this in a price signal directly to the thermostat.

00:58:27.000 –> 00:58:35.000
But it is up to the customer to pre-configure the thermostat to say if the price is at this level, this is the thermostat setting.

00:58:35.000 –> 00:58:42.000
2 degrees higher if the price is even higher 4 degrees higher whatever it is they leave it to the customer to do it That’s very smart.

00:58:42.000 –> 00:58:51.000
So you could have the same thing with EVs. We would have the same thing with a lot of devices.

00:58:51.000 –> 00:58:57.000
But it has to be with the customers concurrence and the customer’s bill has to go down.

00:58:57.000 –> 00:59:12.000
Shouldn’t be our valiant. It shouldn’t be imposed on them. By a paternalistic godfather who say, I’m going to tell you when you will take your shower or when you kids will go to school or when you will cook your food.

00:59:12.000 –> 00:59:21.000
And, well, this is like a whole another conversation and we could, we could spend an hour just on that topic alone.

00:59:21.000 –> 00:59:31.000
In in wrapping up here I mean If you could make, if either one of you could make regulatory change or utility level change around rate designer implementation.

00:59:31.000 –> 00:59:40.000
What would it be? What is the biggest source of conflict or needed change that you think you would? Shift.

00:59:40.000 –> 00:59:41.000
Scott.

00:59:41.000 –> 00:59:48.000
Well, if I was a czar of utilities, utility commissions and rates. Position that I don’t believe is open today, but if they ever made it available, I would ask that we just try more.

00:59:48.000 –> 01:00:11.000
We, embrace a failure a little bit. I’m not saying we waste money and do things frivolously, but we don’t know really what’s gonna really, work with customers as Ahmad said, we need to figure out what customers embrace and so we have to try some things to find that out.

01:00:11.000 –> 01:00:23.000
And so there has to be some willingness to invest some money to say, we need to get to a net 0 decarbonized world and we’re gonna have to try a lot of different things and see which ones work, which ones our customers like.

01:00:23.000 –> 01:00:32.000
And so I would love to see that. Idea of failing fast and there’s lots of bad Silicon Valley examples of this, not necessarily in that way, but in a way that recognizes that we don’t know what we don’t know yet.

01:00:32.000 –> 01:00:41.000
So let’s as an industry try different things with different customer groups to see what does work.

01:00:41.000 –> 01:00:48.000
Absolutely. I think we have to be prepared for failure. I mean, all of the tech companies, all the different products they have, many of them.

01:00:48.000 –> 01:00:56.000
Arrived after a lot of failures. So the problem with our regulatory model and unfortunately is again the issue.

01:00:56.000 –> 01:01:01.000
It is very risk ever and it’s very revenue-focused. It is not customer centric.

01:01:01.000 –> 01:01:09.000
And when I presented on customer centricity at a major utility in the Midwest a few years ago, the 1st question I got.

01:01:09.000 –> 01:01:18.000
From the chief operating officer was, what’s in it for us? I mean the person failed to comprehend the benefits of being customer centric and I said what do you mean?

01:01:18.000 –> 01:01:25.000
He said where’s the revenue? So the revenue centricity mindset has to be replaced with a customer centricity mindset and why?

01:01:25.000 –> 01:01:27.000
Because that is in the planets interest. We have to go beyond our selfish, narrow interest to looking at the planet and looking at customers.

01:01:27.000 –> 01:01:38.000
I mean, I was truly stranded, stunned when I heard the person say, what’s in it for us?

01:01:38.000 –> 01:01:46.000
Can you imagine Nordstrom CEO saying to somebody who says, our marketing research shows this and this and the person saying, what’s in it for us?

01:01:46.000 –> 01:01:55.000
I mean, that we, that will spell doom.

01:01:55.000 –> 01:01:56.000
At least 2 h.

01:01:56.000 –> 01:02:05.000
Well, we could genuinely very easily fill another hour, but we are. At time, absolutely. And I tried to take many of the questions that came in the chat and lumped them together and I think we addressed many of them in our natural conversation but if you want to rewatch this go to latitude media.

01:02:05.000 –> 01:02:21.000
Com slash events and also you can email editorial at latitude media. Calm if you want to follow up on some of these questions and we might be able to pass them along.

01:02:21.000 –> 01:02:22.000
As well. So Dr. Amad Faruki and Scott Angstrom, thank you both so much.

01:02:22.000 –> 01:02:27.000
Ahmad, great to see you.

01:02:27.000 –> 01:02:28.000
Thank you. Thank you, Stephen. Thanks so much.

01:02:28.000 –> 01:02:35.000
Thank you very much. It was a pleasure to see both of you.

01:02:35.000 –> 01:02:36.000
Thanks.

01:02:36.000 –> 01:02:37.000
I’ve I’ve never had so much fun talking about rates. Thank you everyone for joining us.

01:02:37.000 –> 01:02:38.000
And again, we also make a podcast called With Great Power in partnership with grid X. We just had Dr.

01:02:38.000 –> 01:02:43.000
Fruki on the show. We have a bunch of other people who are working on these really difficult challenges.