One surprising fact that Illinois consumers learn at CUB events is that power prices are reasonable, well, most of the time.
That’s not an easy sell to people who are sick of paying higher power bills month after month. A big part of the problem is that most of us are chained to traditional power rates, which only change once a year, going up slightly in summer months. Fortunately, new pricing plans are arriving on the scene that would allow customers to take advantage of naturally fluctuating rates.
In the real world, over the course of the day electricity market prices fluctuate from about 2 cents per kilowatt-hour (kWh) in the middle of the night to 13 cents per kWh or more during “peak” times. (Think a hot summer day when factories are humming and everyone’s cranking up the AC.)
Those peak times–a relative handful of hours over the course of the year–absolutely kill us on our electric bills. That’s because in order to be ready for peak demand, the power generators have to build enough power plants, and those plants cost big money to build and maintain–even though some of those plants are ONLY used a few times a year, during those hours of intense demand.
Guess who funds those expensive power plants? (Take a look in the mirror, and then at your electric bill.) That’s why CUB advocates for more flexible pricing plans. A good example is dynamic hourly pricing, which reporter Jeffrey Tomich, one of the Midwest’s best energy writers, explained in his recent article.
The optional pricing plan, offered to ComEd and Ameren customers, has been delivering significant savings off the supply portion of their bill. For example, ComEd’s Real-Time Pricing was shown to save customers, on average, 28 percent in 2013. CUB Executive Director David Kolata is one of the program’s happy customers.
Kolata tells Tomich the beauty of such creative pricing plans is that not everyone has to participate for the program to reduce peak demand, reduce the need for so many power plants, and reduce our electric bills. He estimates that just 5 to 10 percent of consumers enrolled in such alternative plans could make a difference.
“So much of our power costs are determined by 20 or 30 hours of the year,” he said.
Of course, dynamic hourly pricing is not for everyone, and there are some risks. We’ve written about the $2 per kWh “polar vortex” price spike. But participants say the benefits outweigh risks. “Over the course of the program, our savings have been such that they easily offset any spikes,” says Margaret Sabatino, of Oak Park, who estimates she and her husband have cut their electric bills by about a third.
Ahmad Faruqui, a principal at the Brattle Group who closely follows dynamic pricing programs, goes even further, saying there are billions of dollars in potential benefits in programs like this. And as Ameren and ComEd launch “smart grid” upgrades, it becomes easier for more consumers to take advantage of new power pricing plans.