Consumer Questions Regarding the “Smart Grid”:

1. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Consumer Questions Regarding the “Smart Grid”: • Which technology components can be cost effectively deployed to help residential customers save money and reduce electricity use • What are the best means to promote conservation and change consumption patterns (in California)

2. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? The Punch Line: Some smart grid components are valuable, but spending billions to send price signals to residential customers may not be the best way to address residential energy use.

3. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Is the Smart Grid a Wise Choice for Consumers? • What are the goals of the SG? • How does the smart grid achieve these goals? • Is it the most effective and efficient way to achieve these goals?

4. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? What is the Smart Grid? • Transmission-level equipment • Substation and distribution equipment • Mass market interval meters and communications • In-home display and automation on customer side of meter • AMI component of most interest to consumer advocates

5. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Common Goals of the residential meter component of SG: • Change in residential energy use • DR (load shifting) through price signals [and automation?] • Energy use reduction through consumer awareness of energy prices [and automation?] • System benefits • Meter reading cost savings • Reliability and outage detection benefits • Integration of renewables through utility control of load

6. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Less Common Goals of the residential component of SG: • Cost allocation – price discrimination by load shape • Operational ‘services’ - prepayment plans, automatic shutoff • Promoting retail choice through access to meter data • Another communications gateway to the customer • Capital additions to rate base in restructured market

7. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer?

8. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Consumer concerns: • The “less common” goals all raise significant consumer protection and equity issues! Are they the real drivers of AMI?? • Does dynamic pricing solve cross-subsidies or create inequities?

9. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Residential energy use – the competing perspectives • Perspective 1: Seeing the actual time-varying price of electricity best way to raise consumer awareness and change electric consumption habits. Spend money on meters and two-way communications to achieve environmental goals. • Perspective 2: Consumer awareness and consumption habits best influenced by public education and other policies. Use money for efficiency and renewables.

10. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? • The truth lies in between. Consumers respond to price signals but also to appeals to civic duty. • Consumer advocates want to maximize return for ratepayer dollar and use cheaper methods when available.

11. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Change in residential energy use: the SG hype • Large reduction in total residential energy use due to change in consumer behavior when exposed to price signal feedback • Will result in the fully automated home that self-responds to price signals based on customer choices • Large residential demand response (load shifting) due to price • Results in reduction in emissions

12. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? DR and residential energy use: One thing we should know • Load shifting on ‘critical days’ does little or nothing to reduce GHG or toxic emissions • Too few hours to matter (6 hours * 15 days = 90 hours) • Actual emissions change depends on generation resource mix between peakers, intermediate and baseload plants • In California little net impact (gas on margin), though load shifting due to ‘critical prices’ on ‘critical days’ may slightly reduce toxic emissions during summer afternoons • Only sustained total reduction in energy use reduce net GHG emissions

13. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Change in residential energy use: Other things we know • Limited demand elasticities of 0.05-0.3 • Reductions of 5-15% based on peak prices multiples higher than average price (ie. 100% to 500% of off-peak price) • Higher DR due to automation • Consumer response to education, public appeals and feedback • Not clear DR technology relevant for EE in residential market

14. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Change in residential energy use: what are we talking about • Variable speed equipment – refrigerator, air conditioner, pool pump • Discretionary appliance load – dishwasher, dryer, washing machine, pool pumps • Efficiency choices – lights, consumer electronics • Synergies between DR and EE much lower for residential market (for example, no dimmable ballasts, no EMS, complicated HVAC)

15. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Other Policy Methods of Influencing Consumer Behavior • PR, PSAs and continuing message from high level officials • ISO emergency PSAs • ‘Competition/Shaming’ policies (i.e. SMUD) • Long-term education (recycling bins) • School education • On-bill financing

16. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Dynamic Pricing • Pro – see real cost, change behavior, eliminate subsidy • Con – cost to implement, relative benefit compared to inverted tiers, TOU, averaging rates a valid goal for rate design

17. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? The Art of Interpretation: PG&E’s SmartRate - Viewpoint 1 • 7.5% opt-in, including 56% CARE customers • Average load reduction 11% CARE, 22% non-CARE • Incremental price of 60 cents/kWh • A resounding success. Lots of DR and great participation.

18. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? The Art of Interpretation: PG&E’s SmartRate - Viewpoint 2 • Bill protection and $50 gift for early sign-up. • 23% increased use. 2.5% missing values. 80% notification. • Air conditioner saturation: 92% non-CARE, 71% CARE • Rate differentials between 4:1 and 12:1. • Why did 92.5% turn down free money? Very low elasticity. What will happen to the non-AC population? Is a 16% reduction worth the cost, bill impacts, and other impacts of 8760 data points?

19. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Brief Anatomy of a Greenwash Campaign

20. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Anatomy of a Greenwash Campaign 1995-97 Direct Access Working Group (DAWG) discussions regarding competitive universal meter deployment D.97-05-039 Competitive metering • California Consumer Empowerment Association (eMeter, ABBG, Echelon, Siemens) files PTM to force universal meter deployment by IOUs Sep. 2003 Peevey ACR proposes analysis framework for AMI July 2004 Peevey ACR ordering the filing of AMI proposals by December

21. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Anatomy of a Greenwash Campaign ? Demand Response and Advanced Metering Coalition (Cellnet, Comverge, Echelon, eMeter, EnerNOC, Itron, Hunt, etc.) • Creation of the U.S. Demand Response Coordinating Committee (utilities!) • Lots of national meetings about smart metering and demand response 2008 DRAM changes names to Demand Response and Smart Grid Coalition ? Smart Grid = Green Grid

22. PANC Seminar, May 4, 2009 The Smart Grid or the Smart Consumer? Thank you for listening! Feel free to contact us. Marcel Hawiger, Staff Attorney The Utility Reform Network 711 Van Ness Avenue, Suite 350 San Francisco, CA 94102 415-929-8876 marcel@turn.org