You asked for information on a pilot program in Chicago that encouraged consumers to use electricity more efficiently by pricing electricity on an hourly basis.

SUMMARY

Residential customers who participated in this program were charged electric rates that varied hourly, based on the wholesale market prices. The non-profit organization that administered the program helped customers track their consumption and shift their electricity usage from peak demand periods to less expensive off-peak periods. The program ran as a pilot from 2003 through 2006. During this period, participating customers saved an average of 10% on their summertime electric bills, reduced their power use, and reduced demands on the electric grid. The Illinois legislature substantially expanded the program in 2006, and it is now available in most of the state.

REAL TIME ELECTRICITY PRICING PROGRAM

The Community Energy Cooperative, a Chicago-based nonprofit organization, in association with Commonwealth Edison (ComEd), the electric utility serving northern Illinois, introduced the Energy-Smart Pricing Plan in January, 2003. The program was the first significant effort in the nation to introduce real time electricity pricing to residential customers. Participating customers were charged rates that fluctuated hourly, based on changes in the wholesale market. However, prices were capped so that no customer was charged more than $ 0. 50 per kilowatt-hour (kwh). The wholesale price can substantially exceed this amount during peak demand periods, e. g. , particularly hot summer days.

The program's goal was to allow participating customers and the market as a whole to capture the benefits of having retail prices of electricity reflect the costs of providing power to customers. Unlike similar programs, the Chicago program sought to determine whether residential customers would respond to real time prices without expensive technology, such as meters with two-way communications capability and energy management systems that automatically respond to price signals. Instead, participating customers were billed using meters that measured hour-to-hour changes in their electricity use. The program included the full range of residential customers, including low-income customers.

Under the program, participating customers were notified by telephone or e-mail when the wholesale price for electricity for the next day (as distinct from other components of rates such as transmission and distribution charges) was projected to exceed 10 cents per kwh. The projected price was also posted on the program's website. This notification was provided to make participants aware of relatively expensive wholesale prices charged during peak periods and to adjust their consumption accordingly. The cooperative provided energy education and individual usage information to help customers shift their consumption to less expensive off-peak periods.

More than 750 customers participated in the program in its first year. The number expanded to 1,500 customers by 2005. The weather varied dramatically during the pilot program. In 2003 weather conditions were relatively mild, and hourly electricity prices rose above 10 cents per kwh on only 20 days, usually for only three or four hours per day. The summer of 2004 was even milder, with the fourth coolest summer in the previous 25 years. (In Chicago, as in Connecticut, electric demand and market prices peak in the summer. ) In contrast, June and July of 2005 were ranked as the sixth warmest of all comparable months on record since 1871.

A series of third party evaluations of the programs found that participants reduced their overall monthly summer energy usage and cut their electricity bills. For the overall pilot period, participants saved an average of 10% on their bills, reduced their power use, and reduced demands on the electric grid. On July 25, 2005, the day during the pilot stage of the program with the highest prices, participants reduced their peak hour consumption by 15% compared to other residential customers. The evaluation is available at http: //www. energycooperative. org/pdf/ESPP-Evaluation-Final-Report-2005. pdf.

In 2006, the Illinois General Assembly voted to expand the program by requiring all of the state's utilities serving 100,000 or more customers to offer it to their customers (PA 94-977).

KM: dw