State Weighs Incentives to Cut Peak Energy Use

Oct 24 - Record, The; Bergen County, N.J.

What would it take to get you to reduce your home energy use - the sting of paying higher electricity prices during peak hours of demand? A cash incentive to turn the air conditioner off on hot days?

New Jersey officials plan to look at these and other ways to nudge residents to lower electric use during peak demand periods as the state acts on the ambitious goals set out in the energy master plan Governor Corzine unveiled this week.

The plan includes more flashy initiatives, such as developing wind, solar and other renewable energy sources. But buried deep in the document is a section that proposes pilot projects to prod residents to reduce home energy use. Corzine wants conservation to cut energy use 20 percent over 12 years. Reducing energy use to lower consumer costs and greenhouse gas emissions may be a relatively uncontroversial goal, but setting electricity rates higher during peak demand periods -- a practice known as "real-time pricing" -- worries consumer advocates.

"It benefits us all-around to reduce peak demand," said New Jersey Rate Council Director Stefanie A. Brand. "But we feel very strongly that real-time pricing for residential customers is not a good idea. It gets really dangerous."

Many people could avoid the higher rates by altering their behavior - doing laundry early in the morning, setting the dishwasher timer to run at midnight.

But some people who can least afford to pay the higher rates are not in a position to change behavior and avoid using electricity at peak times, including the elderly, people at home with small children and those with disabilities, Brand said.

Brand said such programs are better suited to large energy users, such as companies, which look to reduce energy use anyway because it's a sizable cost of doing business. Currently, about 2,200 companies in the state - those which use over 1,000 kilowatt hours of electricity - must participate in such pricing, said Ronald Reisman, manager of business outreach at the state Board of Public Utilities. The BPU is looking at whether to make the requirement apply to companies with lower rates of electricity use.

Electricity is the only energy supply that can't be stored, the way oil or natural gas can be. As a result, utilities must build enough capacity to meet peak demand. That's inefficient - some power plants are used only 100 hours a year, during those peak periods.

Because of the inefficiency, a kilowatt produced during low demand costs a lot less to produce than a kilowatt produced during peak demand, said Ronald Reisman, manager of business outreach for the BPU. Yet the way the system works now, you'd pay the same price for either kilowatt.

That's what makes the concept of real-time pricing so appealing.

PSE&G ran a pilot project in 2007 which tested in-home technology that provided information on higher pricing for peak use, and gave customers information about their use. They used less during peak periods and saved money, PSE&G said.

"You certainly want to send the appropriate price signal to the market," Reisman said. But, he added: "We have to recognize that with some residential users, you have a captive audience that's not going to be able to shift their electric usage."

In addition to higher rates, the energy master plan will look at financial incentives to solicit volunteers to reduce their energy consumption. PSE&G, for instance, has a "Cool Customer Program," where 119,000 customers have agreed to have a device installed on their central air-conditioning units that cycle the system off for short periods during high electric demand. In return, customers receive financial rewards.

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E-mail: oneillj@northjersey.com