Time is money. And for San Diego Gas & Electric customers, the time of day and night you use electricity will soon cost — or save — you money.
As per directives from the Legislature and the California Public Utilities Commission, SDG&E will become the first of the state’s three investor-owned power companies to move customers from a tiered billing system to a “time of use” format.
The rollout begins in early March and will affect just about all of the 750,000 residential customers in SDG&E’s service territory. The transition will be done in stages — contacting about 75,000 to 100,000 customers per month — with the utility expecting to complete the plan by the middle of next year.
Some 100,000 customers will go first, starting next month.
“We think that with the information that we’ll give them and some easy ways to save, this is going to make a lot of sense for most customers,” said Scott Crider, SDG&E’s vice president of customer services.
Unlike a tiered-rate structure in which customers move into higher pay bands as they use more electricity, under a time-of-use, or TOU system, customers pay different prices per kilowatt-hour depending on when they use electricity.
The more electricity you use when the power grid is at its peak, the more you pay. Conversely, if you use electricity when demand and energy prices are low, you pay less.
The most expensive time of the day runs from 4 p.m. to 9 p.m. That’s when energy demand surges, as customers come home from work and fire up their appliances and — especially in the summer — turn on their air conditioners. It also, as the sun sets, coincides with a decrease in the amount of solar power being produced.
“An effective way to respond to time of use rates is not to stop using your appliances,” said Edward Randolph, the CPUC’s Energy Division Director. “It’s to think about when you use your appliances. If you can do laundry earlier in the day or later in the evening, that’s when you can do it, not at 7 in the evening.”
The idea is to send price signals to California energy consumers to use electricity when solar and wind generation abound.
In 2013, the Legislature passed Assembly Bill 327 to reform residential rates. The bill included a provision calling on investor-owned utilities to adopt TOU pilot programs. The utilities commission was ultimately given the authority to implement TOU rates and placed a timeline on rolling out the new rate structures.
“Time of use is going to be a critical element in integrating renewable resources into the electric grid,” Randolph said. “That helps us make better use of the renewable energy after it’s generated.”
What SDG&E is doing
Starting about 90 days out, customers will receive emails and notices in the mail about the change from tiered rates to TOU.
SDG&E has established a default plan called Time Of Use-DR1. That means residents will automatically get signed up for TOU-DR1 unless they specifically say they want to sign up for two other options.
TOU-DR1 breaks the day into three periods: on-peak, off-peak and super off-peak.
The on-peak prices are the highest: 45 cents per kilowatt-hour in the summer (June 1-Oct. 31) and 24 cents per kilowatt-hour in the winter (Nov. 1-May 31).
Off-peak prices fall to 21 cents a kilowatt-hour in the summer and 23 cents in the winter.
Super-off peak prices are even cheaper: 16 cents a kilowatt-hour in the summer and 22 cents in the winter.
On-peak rates — the most expensive — run each day from 4 p.m. to 9 p.m. The rest of the 24-hour period is divided between off-peak and super-off peak. On weekends and holidays, times for super off-peak are extended.
SDG&E is offering a second time-of-use plan, called TOU-DR2.
The price structure is the same but there is no super-off peak option — only on-peak and off-peak. There is also no weekend or holiday schedule.
There is one other option: customers can remain on the standard, tiered plan if they choose.
But if customers do not make a choice, they will automatically get enrolled into TOU-DR1. Over the course of the first year, customers can switch to a different plan at no cost.
Under CPUC rules, customers will get “bill protection.”
Once the change has been made, SDG&E for one year will include in customers’ monthly statements a “shadow bill” that will show the difference between the TOU plan they’ve selected and the standard, tiered-rate plan so people can see if they really are saving money.
If, at the end of one year, customers paid more under TOU, the difference will be credited to them.
“We really think this is a good way to ensure that customers can get comfortable with the new time of use (plan),” Crider said.
But will customers adjust their electricity usage on a large scale, or will they just consider time of use a big hassle?
“If you go back to the old days of telephone and early cellphone service, we paid more to make a phone call in the middle of the day at peak times,” Randolph said. “So the concept of paying different rates based on demand on the system is an old thing and people were very good at adjusting to it to save money.”
Some SDG&E residential customers will get exemptions from the TOU mandate.
Crider said “medical baseline” customers who rely on equipment and devices that run day and night will not be affected. So will some low-income customers who live in “hot climate areas” such as Borrego Springs.
Some of the information SDG&E will mail to residential customers regarding a shift to “time of use” rate plans. (Photo by Rob Nikolewski)
While TOU may be a new experience for many, about 150,000 residential and 80,000 commercial customers are already on SDG&E’s time of use plans. The majority of the residential customers joined while taking part in SDG&E’s pilot programs.
Originally, the utilities commission wanted TOU programs rolled out in 2019 by all three of the investor-owned utilities in the state — SDG&E, Southern California Edison and Pacific Gas & Electric.
But Randolph said Edison and PG&E were not ready.
SDG&E’s “computer systems, their billing systems, are ready to do it in 2019 while the other (utilities) need to upgrade their billing systems,” Randolph said. “So we delayed it … for the other two.” The rollouts for Edison and PG&E is scheduled for the fall of 2020 and are expected to finish by 2021.
Other states such as Arizona — where air conditioning usage is high — have adopted TOU plans. But with about 20 million customers among three investor-owned utilities, the scale of the rollout in California is considered the largest in the nation.
“We’ve invested a lot of resources into ensuring that we can do this and we feel very confident that we’ll be able to” complete a smooth transition,” Crider said.
Under TOU, customers each month are still assigned a “baseline allowance” — the amount each month in kilowatt-hours that is considered “reasonable” energy needs of an average ratepayer in a given climate zone (coastal, inland, mountain or desert).
When the baseline is exceeded, the price of electricity charged to the customer goes up.
For example, under TOU-DR1 (SDG&E’s default option), on-peak prices go from 45 cents per kilowatt-hour to 65 cents.
However, under TOU, there is no dreaded “high usage charge.”
Last summer’s stretch of oppressive heat resulted in a deluge of complaints to SDG&E from some customers whose electricity usage exceeded four times their allotted baseline, thus triggering the charge put into place by the CPUC the previous November.
Some residents reported bills 50 percent or higher than usual.
Under time of use, there are no high usage charges. However, just as in the tiered-rates system, TOU customers will pay more when they exceed 130 percent of their baseline.
California’s policymakers also hope the widespread adoption of TOU will lead to a boost in sales of battery storage systems paired with solar panels.
With storage, homeowners with solar panels can save up the energy generated by the sun during the day and then use it later, when the sun goes down and solar generation wanes.
“That’s actually one of the big tools you can really use to manage your billing under time of use,” Randolph said. “Use the battery and the solar panels to help you become less dependent on the grid during those peak hours. It can be a huge cost savings.”
In 2017, a typical solar battery storage system cost about $6,200 but after federal and California incentives, the figure can be reduced by about $4,000.