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Residential Pilot to Test “Smart Metering” for DC Electric Customers

Tuesday, July 15, 2008

Advanced Technology, Innovative Rates Could Help Reduce Customer Bills

Beginning next week, a group of selected residential electricity consumers in the District of Columbia will test advanced metering technology coupled with innovative pricing options that could assist them in curbing their monthly bills by better controlling their power consumption. The pilot program known as PowerCentsDC™ will be the first in the electric utility industry to test the response of residential customers to three different innovative pricing options under one program.

Each of these pricing options will enable participating Pepco customers to save on their bills by reducing electricity usage during designated hours when wholesale electricity prices are high. Participants will be notified of forthcoming high prices on the previous day.

“In this time of rising energy prices, we hope to demonstrate through PowerCentsDC that providing customers with additional information could help them reduce electricity usage and potentially lower their bills,” said Mike Sullivan, Senior Vice President of Operations at Pepco Holdings, Inc., the corporate parent of Pepco. “We anticipate that implementing this technology widely will help control the regional electricity prices during peak demand periods.”

The District’s utility regulators approved the program that was filed by Pepco on behalf of Smart Meter Pilot Program, Inc., a nonprofit company comprised of Pepco, the D.C. Office of the People’s Counsel, the D.C. Consumer Utility Board, the International Brotherhood of Electrical Workers Local 1900 and the D.C. Public Service Commission. The program is scheduled to begin Monday, July 21.

The project will be independently evaluated, and the findings will be shared with policymakers for use in future decision-making regarding innovative electricity pricing and demand response in the District of Columbia. “PowerCentsDC represents a novel approach to explore the potential benefits of advanced metering for residents of the District,” said Rick Morgan, Commissioner, D.C. Public Service Commission, and Chairman of the Smart Meter Pilot Program. “By examining how participating customers respond to different kinds of price signals, we hope to create new opportunities for all DC residents to save money on their electricity bills.”

The two-year pilot project, conceived by OPC and funded by $2 million from Pepco through a Settlement agreement, will include about 1,200 randomly selected District residents representing all eight city wards. “ We must ensure that tangible benefits extend to all consumers. We want to learn how consumers react to pricing information and whether they alter their

usage habits, potentially resulting in lower energy costs, achieving energy efficiency gains and a reduction in the amount of kilowatts needed to supply the District of Columbia’s demand, thereby benefiting all consumers,” said Elizabeth A. Noel, D.C. People’s Counsel.

Participants will receive a free “smart meter” installation for their residence, which will measure the customer’s electricity use at hourly intervals and transmit usage data to Pepco each day through a wireless communications network. Each month participants will be sent a detailed Electric Usage Report along with their bills.

About a quarter of the participants will also receive a free “smart thermostat” that will reduce central air conditioner compressor use in response to a radio signal during high priced periods. The thermostat will provide customer messages such as real time electricity price signals and a daily running total of the customer’s bill. The programmable thermostat will automatically control the use of air conditioners or central heating systems during all hours.

PowerCentsDC builds on earlier industry “smart” meter studies, but will be the first to test the advanced metering with three different pricing options: Hourly Pricing, Critical Peak Pricing and Critical Peak Rebate. Each of these pricing options will enable customers to reduce their electricity costs by shifting energy use away from high priced periods. PowerCentsDC places the District in the forefront among states pursuing the benefits of advanced metering technologies, according to Morgan.

Pricing Options:

Under Hourly Pricing, electricity prices will vary hourly. The prices will be set a day ahead, based on prices in the “day ahead” wholesale market operated by PJM Interconnection, the regional power grid. Prices will be available on the project’s Web site or displayed real-time on “smart” thermostats. Based on recent wholesale market trends, hourly prices are expected to exceed conventional power supply prices only about a third of the time within a year, with lower prices the remainder of the time. Customers will be notified of high priced hours a day in advance through an automated phone call, an e-mail, text page or “smart” thermostat notification.

With Critical Peak Pricing, peak prices will be in effect for four hours on critical peak days, of which there are about 15 each year. These critical peak hours during which higher prices are charged will be limited to about 60 hours per year. Customers will be notified of these events the day before through an automated phone call, an e-mail, text page or “smart” thermostat notification. Prices during the critical peak hours will be substantially higher than conventional rates but will be offset by lower prices during the remaining 8,700 hours of the year.

Under Critical Peak Rebate, participants will continue to pay the same generation charges as the Standard Offer Service charged by Pepco. During critical peak events, however, customers can earn rebates by reducing their consumption below what they would normally have used during those times. Customers will be notified of these events the day before through an automated phone call, an e-mail, text page or “smart” thermostat notification.

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