Dive Brief:
- JD Power expects that electric utilities this year will begin to focus on time-of-use pricing as a way to consume more renewables and balance the grid, but the firm cautioned that any rate changes are likely to impact customer satisfaction in one way or another.
- Customers don't want new rates forced onto them, the firm warned, though they can be more accepting if the changes come as part of a broader environmental initiative.
- The firm also predicts the sector will focus on continued solar growth, electric vehicles and new revenue streams.
Dive Insight:
California's investor-owned utilities are rolling out default time-of-use rates to millions of customers this year, and utilities around the country will be watching closely. Electric rates that more accurately reflect market conditions would help utilities integrate more distributed resources, but customers have been on fixed rate plans for decades.
How will customers react to the new rates?
"Based on our data, it appears the devil will be in the details," JD Power said in its 2019 Utilities Industry Outlook. "We have found that when pricing options are forced on electric utility customers, they respond with significantly lower customer satisfaction scores."
All is not lost, however. The firm said that when TOU rates "are implemented as part of a broader environmental initiative, complete with proactive communications and price guarantee for one year, satisfaction can actually improve."
In California, Pacific Gas & Electric is focused on providing customers with technologies that will help them take advantage of the new rate, primarily in the form of programmable thermostats.
"We think that's a really good leveraging point for [integrated demand-side management] on the residential side, because in addition to saving energy from both space cooling and space heating, it can also be used by the customer to engage in a wide variety of demand response programs," Richard Aslin, who works on PG&E's demand response policy and pilots team, told Utility Dive.
Integration is a key challenge for utilities as consumers connect more electric vehicles, batteries and solar panels to the grid. Utilities are also investing heavily in technology system upgrades, JD Power found, which allow them to communicate with customers digitally.
Solar will reach a "tipping point" this year, JD Power said. Solar capacity jumped 24% in 2017 and grew another 8% in the first three quarters of last year, the firm estimated. Nationwide, 43% of electric utility customers are considering solar power, the firm said.
"The biggest obstacle to adoption among the 57% who aren’t interested is cost," the report found.
As electric vehicles grow more common, JD Power also said utilities will need to focus on accommodating them.
"Surprisingly, despite the obvious push into products and services designed to spark new revenue streams, electric utilities have so far not been particularly aggressive in their embrace of electric vehicles as a potential source of new demand," the firm said.
Adoption is still relatively low, but experts believe that will soon change. Of more than 250 million vehicles registered in the United States, today less than 1 million of those are electric. The Edison Electric Institute, which represents investor-owned utilities, believes there will be 7 million of zero-emissions vehicles on U.S. roads by 2025.
