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Real Time Pricing Alive and Well in Georgia

The most successful real-time pricing program in the United States has become even more successful. In January 2005, the Georgia Public Service Commission confirmed a broad-based settlement that it had adopted in Georgia Power Company's rate case (Docket No. 18300-U) that kept the company’s Real-Time Pricing (“RTP”) tariff intact and opened 450 MW of additional commercial load to RTP. That load was gobbled up in one day by eager commercial customers. This article discusses why Georgia Power’s RTP program continues to expand even though many real-time pricing programs of other utilities have floundered.

According to a recent draft survey of various state RTP tariffs performed for the U.S. Department of Energy,(1) “Georgia Power’s [RTP] program, … comprises 60% of all non-residential RTP participants,” has almost 50 percent of the entire RTP load of the states surveyed, and has achieved five times as much percentage peak load reduction as any other utility program. The results would be even more favorable today as the draft DOE survey was performed before Georgia Power opened the additional 450 MW of commercial load to RTP. Indeed, according to the DOE survey, if another utility had an RTP program that included only this 450 MW of incremental RTP load, the utility would have one of the ten largest RTP programs in the country in terms of MW and perhaps the second largest in terms of the number of customers. The recent Georgia Power rate case indicates why the program is so successful.

Notably, Georgia Power’s RTP tariff was supported by both commercial and industrial customers during the rate case whereas most RTP programs are limited to the largest industrial customers. Indeed, nearly 900 commercial facilities reportedly signed up for all of the incremental RTP on the first day it was offered. Ironically, most RTP studies have focused narrowly on the amount of load reduction achieved through RTP on the absolute peak demand day. Thus, the focus has been on the larger industrial customers that may be able to avoid a manufacturing shift on a peak day. However, in Georgia Power’s rate case, commercial customers told another side of the story.

Wal-Mart Director of Project Development Jim Stanway testified that “the RTP-DA rate schedule is the only rate schedule in the country that has directly changed our building design.” For example, Wal-Mart has installed gas-driven desiccant systems and natural gas-fired bakery facilities to minimize summer load and designed electric heating into Georgia stores to take advantage of the low RTP winter and other off-peak price signals. A number of other commercial witnesses likewise testified as to how real time price signals have caused their commercial facilities to flatten their load throughout the year, not just on one peak day. Thus, Terry Civic, BJ’s Manager of Energy, told of BJ’s designing sales floor lighting systems to utilize free daylighting so as to drop 50 percent of overhead lighting during peak summer afternoons. Rick Swiontek, Energy Manager for Kohl’s told of how Kohl’s has implemented dual enthalpy controls in its Georgia stores to use “free cooling” from outside air when it is available, and Charlie Martin, Energy Manager for Lowe’s added how Lowe’s uses highly reflective roofing systems and state of the art digital building energy management systems to manage price swings. Thus, real-time pricing drives technological change and energy efficiencies that are not captured by a simple peak day load reduction analysis — in essence, these commercial customers are reducing load throughout the summer.

Under Georgia Power’s RTP tariff, customers with load as low as 250 KW at a site can elect to have a portion of that load qualify for real time day ahead pricing (or hour ahead pricing with 5 MW load) with the remaining load portion (called the Customer Base Load) being served under the applicable general rate schedule that the customer chooses. The real-time pricing generally is Georgia Power’s projected incremental cost to serve the RTP load, which cost tends to run low in off-peak periods and high on-peak. These price signals then drive the commercial store design response described above that increases the load factor of the system as a whole and allows Georgia Power to avoid additional costs to build new generation. Further, the general tariff rates that Georgia Power charges these commercial customers for their Customer Base Load portion provides a very healthy return toward embedded costs thereby benefiting non-RTP customers. In any event, given the response from its commercial customers, Georgia Power’s RTP program is more successful than ever.

(1) Survey of Utility Experience with Real Time Pricing, Barbose, Goldman and Neenan, Prepared for the DOE Office of Electric Transmission and Distribution of the Assistant Secretary for Energy Efficiency and Renewable Energy (October 2004 Draft).

Posted in Articles, Articles written by Alan Jenkins

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