Ask Pablo: Why Would My Electric Utility Want Me To Use Less Electricity?

PG&E/Opower/Screen capture

Dear Pablo: My electric utility is always trying to help me find new ways to save electricity. What is their incentive for doing this? Should't they want to sell me more of their product?

It seems counter-intuitive, almost like an airline encouraging you to fly less. So why then would a utility company want to encourage energy efficiency? Is it just an attempt at greenwashing? Is it due to some government regulation? Let's find out.

Why A Utility Wants You To Conserve

In some utility markets there is regulation in place that requires decoupling of revenue and profits. What this means is that utilities have a right to charge consumers for their fixed costs (maintenance, operations, etc.) plus some modest percentage (a guaranteed, fixed profit). If a utility brings in more revenue than allowed it must issue refunds, and if it brings in less the state compensates them for the difference. In effect this incentivizes the utility to produce less electricity because they get to pocket the savings and are guaranteed a certain profit. In other, less regulated markets, capacity constraints may encourage conservation. Since it is very costly to permit, construct, and operate a new power plant, it can sometimes be more cost-effective to promote conservation as a means to control demand. According to one source, the cost of a coal-fired power plant ranges between $807-2,719 per kilowatt of capacity, or up to $897,000,000 for an average-sized coal-fired power plant. So, for utilities that are near capacity, a reduction in demand of one kilowatt (that's like a hair-dryer or toaster) can save them hundreds to thousands of dollars in avoided costs.

How Utilities Can Help You Conserve

Utility companies have been funding energy efficiency for years. This includes CFL subsidies, appliance rebates, and solar photovoltaic system incentives.

Now utility companies are starting to engage more directly with their customers through services like those provided by California cleantech darling, Opower. Enabled by the proliferation of smart meters (which, incidentally, will not kill you), Opower is able to show energy use on a much more granular scale than we have been used to. Traditionally we received a utility bill once a month and we could see how electricity usage went up in the summer with air conditioning demand and natural gas usage went up in the winter with heating demand, but that was about it.

PG&E/Opower/Screen capture

When I log into my account with PG&E I am now accessing the Opower customer engagement platform. Opower allows me to see my electricity usage on an hour-by-hour basis, compare my energy usage to weather trends, and compare my energy usage to similar homes and the most efficient homes in my neighborhood. The tool also allows me to evaluate behavioral, low-cost, and higher-cost actions to reduce my energy use. It was no surprise to me to learn that my house is more efficient than even the average of the twentieth percentile. After all I got a home energy audit, insulated my pipes, turned down my water heater, and installed a programmable thermostat.

PG&E/Opower/Screen capture

Whether your utility offers incentives or not, it is in your own economic best interest to reduce your energy use. Subsidies and rebates make some things even more cost-effective but there are a lot of no-cost or low-cost action that you can take. Start by clicking on some of the links in the paragraph above and be sure to send me any of your questions.

Pablo Päster has been writing Ask Pablo since 2006 and is Principal Energy and Sustainability Consultant at Hara. Send your questions to Pablo(at)TreeHugger.com and connect to his RSS feed.

Tags: Electricity | Energy | Energy Efficiency | Utilities

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