Study by Brattle Economists Evaluates Time-of-Use (TOU) Pilots for Maryland Utilities
Prepared for Maryland Joint Utilities
In a new study prepared for BGE, Pepco, and DPL – collectively referenced as the Maryland Utilities, consultants at The Brattle Group evaluated the results from the first year of the Maryland Utilities’ PC44 Time-of-Use (TOU) rate pilots. The analysis found that TOU customers reduced their summer peak demand in the range of 10% to 14% and experienced bill savings up to 10%. Low and moderate income (LMI) customers responded to the price signals similarly to other customers.
As part of the Maryland Public Service Commission’s PC44 proceedings, the Maryland Utilities designed TOU pilots in a collaborative Work Group process that took place in late 2018 and early 2019. While there is a long history in the US of running TOU pilots, the PC44 pilots included several unique features, such as separately measuring the impact of TOU rates on LMI and non-LMI customers and providing detailed bill impact information to the customers during the recruitment stage. The pilots are scheduled to run through May 31, 2021.
The Brattle study includes the results from an impact evaluation of the first year of the pilot, from June 2019 through May 31, 2020. The key findings of the Brattle analysis are as follows:
- Peak reductions in the summer months (June through September) range from 10.2% to 14.8%, while those in the non-summer months (October through May) range from 5.1% to 6.1%. TOU customers also reduced their overall energy consumption in the summer months from 2.8% to 4.9%.
- LMI customers responded to the TOU prices nearly as much as other customers. The demand response of LMI customers is sizable and statistically significant.
- Two-thirds of the customers who chose to participate in the pilot would have seen a decrease in their bills even without changing their behavior. These “structural winner” customers’ peak reductions were comparable to those of other customers, contradicting a commonly held belief that opt-in pilots will only attract structural winners and that, once on the rate, these customers will not respond to the price signals.
- On average, all customers on the TOU rates (including LMI customers) enjoyed bill savings of 5% to 10%.
Summer Weekday Peak Impacts
- In evaluating the impact of COVID-19 on customer behavior, which was observed in the months of April and May 2020, non-summer peak impacts remained largely similar for BGE and Pepco during these months, while they were lower for DPL. Pilot customers of all three utilities revealed a larger tendency to conserve load during this time, as exhibited by large daily price elasticities.
- The summer reductions in peak periods, when correlated with the price ratios in the PC44 TOU pilots, are consistent with results of other pricing pilots in the Arcturus database that Brattle has developed over the years.
“These pilots implemented by the Maryland Utilities provide conclusive evidence that LMI customers do respond to TOU rates and enjoy bill savings just like other customers. It is time to accept this finding and deploy time-varying rates widely without being concerned that they might harm LMI customers,” study coauthor Sanem Sergici, a Brattle principal, said.
The study, “PC44 Time of Use Pilots: Year One Evaluation,” is authored by Brattle Principals Sanem Sergici and Ahmad Faruqui, Senior Associate Nicholas Powers, Electricity Modeling Specialist Sai Shetty, and Senior Research Analyst Jingchen Jiang.
