Evaluation of evolving residential electricity tariffs

Abstract

Residential customers in California’s Pacific Gas and Electric (PG&E) territory have seen several electricity rate structure changes in the past decade. A relatively simple two-tiered pricing system (charges by usage under/over baseline for the home’s climate zone) was replaced in the summer of 2001 by a more complicated five-tiered system (usage below baseline and up to 30%, 100%, 200%, and 300%+ over baseline). In 2009, PG&E began the process of upgrading its residential customers to Smart Meters and laying the groundwork for time of use pricing, due to start in 2011. This paper examines the history of the tiered pricing system, discusses the problems the utility encountered with its Smart Meter roll out, and evaluates the proposed dynamic pricing incentive structures. Scenario analyses of example PG&E customer bills will also be presented. What would these residential customers pay if they were still operating under a tiered structure, and/or if they participated in peak hour reductions?