New York approves 'innovative' Con Edison pricing pilot with dual recruitment strategies

Dive Brief:

The New York Public Service Commission last week authorized Consolidated Edison to offer an "innovative pricing pilot program" aimed at helping to better align energy use with time-based price signals. Con Edison will recruit about 67,000 customers with advanced metering infrastructure from Staten Island, Westchester County and Brooklyn.
For small commercial customers and some residential customers, the utility will use an opt-out enrollment strategy — whereby customers need to actively decline the program — which it says will allow it to collect more useful information to help design rates in the future.
Customers who are signed up for the program are provided a one-year price guarantee. The pilot will run through March 2022, with the results helping the company and regulators decide whether the program should be expanded.

Dive Insight:

California isn't the only place experimenting with opt-out time-of-use rates, which utilities believe will eventually be a key strategy to sending customers more accurate time-based pricing signals.

In the Golden State, investor-owned utilities will begin shifting all customers to TOU rates in 2019 and 2020. Consolidated Edison's opt-out approach in New York will be a much smaller pilot but the ultimate aim is the same: moving customers into rate plans that allow utilities to better match supply and demand.

Con Edison says its Innovative Pricing Pilot is applicable to mass market customers taking service under rate schedules SC-1 (residential) and SC-2 (small commercial with loads less than 10 kW). The utility says both opt-in and opt-out recruitment methods will be used for SC-1 customers, while only opt-out recruitment will be used for SC-2 customers.

“With opt-in recruitment, randomly chosen customers are encouraged to let us know they would like to participate in the pilot. With opt-out recruitment, we notify randomly chosen customers of their selection for the pilot and ask them to let us know if they do not want to participate. If one of these customers does not respond, we take that as a willingness to participate," Con Edison explained in a statement to Utility Dive.

The two enrollment strategies "will provide different insights," the utility said. "The opt-out phase will provide results that are more representative of the customer population in general. The information will be more useful in helping us design rates in the future."

The utility said it will only use opt-out strategies for SC-2 customers in order to acquire sufficient numbers. "There will not be enough SC-2 customers with smart meters to support both opt-in and opt-out recruitment for those customers," Con Edison said.

Regulators said the new rates are designed to better align delivery charges with the cost of providing delivery service and are primarily demand-based, compared with current rates based on energy consumption.

"Significantly, the program will provide information as to whether customers will reduce peak demand and therefore infrastructure costs, which will help to reduce costs for all customers," the PSC said.

Customers can drop out of the program at any time but cannot re-enroll for 18 months.

Consolidated Edison began working with Nexant in early 2017 to design the program, and the utility filed its proposal with the PSC in July 2018. Con Edison's filing includes a description of the plan from Nexant which explains that as part of the pilot, customers will be offered one of four time‐variant, demand‐based delivery rates or one of two demand‐based subscription rates.

"For all but one of the time‐variant demand‐based delivery rates, charges for electricity supply will continue to be based on a single monthly rate for all kWh usage. One of the rate structures will include time‐varying supply rates," Nexant explained.

The company also said the goal will be to start customers on the new rate structures at the same time regardless of enrollment strategy. "This will provide a side‐by‐side comparison of behavioral changes under the two
enrollment strategies," Nexant said.

Comparing load impacts during the same period for customers who have been on the rates for different lengths of time "could lead to erroneous conclusions since any observed difference might be due to differences in the amount of time that customers were on the rates rather than due to differences in the mix of customers that enroll under opt‐in and default conditions," according to ConEd's filing.

"Conducting the opt‐in and opt‐out methods simultaneously will also allow for comparisons of load effects during periods sharing the same weather," Nexant said.