This is an excerpt from EERE Network News, a weekly electronic newsletter.

November 13, 2002

Puget Sound Energy to Restructure Time-of-Use Pilot

Many people fail to realize an essential fact about electricity: it's not just how much of it you use, but when. Using electricity during the daytime hours, when most utilities experience their peak loads, can drive up energy costs and strain electrical systems. Since utilities will often draw on their least-efficient, most-polluting plants to meet their peak load, using electricity at these times also carries with it heavy penalties in terms of total energy use and pollution. The problem is, most consumers pay a flat rate, so they have no incentive to shift their electrical use to off-peak hours.

The utility industry has a solution to this problem: "time-of-use" or "time-of-day" pricing, which combines a higher electrical rate during peak hours with a meter that actually measures when the electricity is being used, not just how much. When structured correctly, this approach rewards customers by letting them pay much less for off-peak electricity, potentially saving a bundle on their bills.

That is, of course, if the system is structured correctly. Unfortunately, one of the nation's leading time-of-use pilot programs, run by Puget Sound Energy in Washington State, turns out not to have been set up right. The utility announced in late October that the program was working, in one sense: customers managed to cut their electrical load during peak hours by 5 to 6 percent. But the company was greeted with chagrin when it also noted that those customers were paying, on average, about 80 cents more each month than they would have under the standard flat-rate billing. Puget Sound Energy blames the lack of financial rewards on the currently lower cost for peak power, but facing a mass desertion of its program, also announced on November 6th that it will ask the Washington Utilities and Transportation Commission to end the pilot program early. The company plans to restructure the rates for the program; in the meantime, it is giving back $1 per month to the program participants.