Sacramento - The California Energy Commission has approved a feasibility report on dynamic electricity pricing as a means of saving California critically needed electric power during hot summer days.
Under dynamic pricing, customers would be notified about wholesale electricity prices as early as a day in advance to allow them to adjust operations and thus avoid paying high electricity costs the following day. Many commercial and industrial customers already have the specialized metering needed to receive notifications and the California Public Utilities Commission authorized a voluntary dynamic tariff for these customers beginning July 1, 2003.
Of the 50 megawatts of PV installed to date, over 40 megawatts, or 80 percent of the total, has been installed since 2000. Another five to 10 megawatts from solar PV systems will be installed in the state within this year.
The report mandated by law and adopted by the Commission is entitled "The Feasibility of Implementing Dynamic Pricing in California." The report was sent to the Legislature and the Governor's Office. The report can be viewed and downloaded from the 'Commission's web site at
Prepared in consultation with the California Public Utilities Commission, the report assesses the feasibility of implementing real-time, critical peak, and other forms of dynamic electricity tariffs or rates. The study identifies some barriers to universal implementation of the tariffs under current law and the lingering economic issues related to the cost effectiveness of installing advanced interval meters. The report, however, concludes that it is technically feasible to implement dynamic tariffs over the next five years. To assess this, a statewide pricing pilot program conducted jointly by the Energy Commission is underway.
Dynamic tariffs determine electricity rates according to market supply and demand conditions (higher prices during certain peak periods, offset by lower than typical rates during off-peak periods). Use of these rates may help the state avoid electricity crises by sending strong price signals to customers to reduce peak electric demand or shift electric use to off-peak periods.
The report reviews various dynamic pricing tariffs, discusses what dynamic electric tariffs are, the special metering requirements needed to support dynamic tariffs, and how Californians can benefit from this type of tariff.
Customers will use special electric metering and load control equipment available for shedding electric loads during peak periods. Dynamic pricing may not be appropriate for everyone. Customers of multifamily residences, mobile home parks, and sub-metered customers have special metering requirements discussed in the report. Low-income and other vulnerable customer classes need special protections to ensure that they benefit from dynamic tariffs. The report says based on the expected ability of customers to respond to high electricity prices in the short term, the dynamic pricing scheme would be capable of shaving between 2,200 and 11,000 megawatts from California's total electricity peak demand of 50,000 megawatts.
The Energy Commission will continue its close working relationship with the California Public Utilities Commission to develop and implement dynamic tariffs.