Thursday, October 19, 2006

Resolution calling upon the Public Service Commission to allow individual apartments to access real-time energy pricing through the use of smart meter

Before the New York City Council
Committee on Technology in Government
And Committee on Consumer Affairs

RE: Resolution calling upon the Public Service Commission to allow individual apartments to access real-time energy pricing through the use of smart meters

Chairperson Brewer and other Councilpersons on the Technology in Government and Consumer Affairs committees, my name is Lewis M. Kwit and I am President of Energy Investment Systems (EIS), a NYC consultant firm specializing in energy saving implementation strategies for multifamily buildings.

In October of 2003 we placed the first building in the City, a 48-unit cooperative at 322 Central Park West on Con Edison’s Rider M of the SC 8 tariff to purchase the “energy” portion of electricity based on hourly pricing of the New York Independent System Operator’s (ISO) Day Ahead Market. Three other buildings, 2 in which leaders of the city’s cooperative community live in followed suit.

These leaders, J. Reyes Montblanc, President of the HDFC Council, and Greg Carlson, Director of the Federation of New York Housing Cooperatives and Condominiums, along with Peter Funk at 322 Central Park West and others have also joined together to form the Cooperative Coalition to Prevent Blackouts (CCPB). Energy Investment Systems serves as the CCPB’s technical consultant. In this capacity these buildings served as Guinea Pigs to purchase RTP power in the City and have continued to push the envelope by forming an aggregation to participate in the ISO’s Installed Capacity Special Case Resources curtailment incentive program (ICAP SCR).

From June of 2004 through June of 2006 EIS conducted a program called Real Time Pricing Demonstrations for Multifamily Buildings which was sponsored by the New York State Energy Research and Development Authority (NYSERDA) and the New York State Department of Public Service (PSC).

The first building at 322 CPW was the most advanced project and demonstrated a responsiveness to time sensitive rates which significantly reduced usage during weekday afternoons and nights when peaks occur for the generated portion of power and its delivery. Usage at 322 CPW increased during low priced periods corresponding to off-peak periods. Without price signals to show the differences in wholesale prices residents now pay the same for power at 3:00 AM when wholesale electricity is inexpensive as they do at 3:00 PM on a weekday heat wave when costs are dear and supply is strained.

The blackout in Queens this past summer made New Yorkers once again aware of the reliability limits to the City’s electrical system. Subsequent reports of even more widespread weaknesses throughout other neighborhoods raised alarm levels higher. This event underscored the need for electricity pricing incentives to stimulate responses to demand that reduce peak use. Real Time Pricing brings the economic law of supply and demand into the electricity marketplace to produce efficiencies in the delivery of service and its cost.

That the blackout happened in a time of escalating electricity prices added further injury to insult. New York residents and small businesses were rendered helpless by the blackout that they were helpless to prevent. As these residents who are charged flat rates throughout the day and evening, they have no price incentive to reduce usage when demand on the system and market prices are highest. On top of the losses they suffered, the flat rate structure prevents them from reducing their costs by reducing demand by shifting usage to lower demand periods. A free and open market should produce lower prices at times of lower demand. Real Time Pricing accomplishes this objective. By adding the element of time into the electricity equation residents have the opportunity to do well be doing good.

Today the PSC and Con Edison have not permitted individually metered apartments or single-family homes to purchase and install interval meters with automated meter reading (AMR) capacity. AMR is a feature of what the industry calls “smart meters”.

Smart meters also allow electricity to be measured in small time intervals to permit hourly pricing. The accepted standard interval for smart meters is a 15-minute period. AMR allows meters to be “read” remotely and furthermore allows data to be electronically communicated, analyzed and evaluated. These capacities are used for billing, to develop a better understanding of electric use and to measure curtailment. Curtailment is the conservation and reduction of electricity use during power emergencies. Obviously, if you want to reward end users for using less power when an emergency looms you must be capable of seeing how much power was used before and after on the same day and during other days when no emergency existed.

The CCPB advocates the implementation of smart meters for every electricity customer who wishes to be on a utility rate structure that is based upon the ISO’s Day Ahead Market. We have advocated a master/submetering configuration for apartments which receive bills directly from Con Ed. Such “direct metered” service from Con Ed costs between 15% and 30% more than master metered service that receives what is called a “bulk discount.”

As consumer advocates, the Coalition favors this Master/Submetering configuration as the preferred vehicle to promote time sensitivity for demand response and more importantly participation in curtailment programs of the ISO. Because the ISO provides incentives in 100 kilowatt curtailment blocks, it would literally take one hundred or more apartments to aggregate, inform about pending curtailment events, and trigger reliable responses.

While obviously not impossible, coordination would be less certain than to curtail an entire apartment building with full-time staff and more easily curtailable public spaces.

However, today there is no administrative pathway to master and submeter rental buildings that are direct metered. This presently means that about 2 million households are not able to participate in RTP electricity pricing structures or ISO curtailment incentive programs. As a result the only way that publicly spirited residents would be able to buy RTP-based power is through an alternative electricity provider, or ESCO and only if a smart meter were able to be installed for billing. Therefore, the existing resolution’s intent must be satisfied to allow consumers to impact both the price and reliability of electricity service. After all if a meter doesn’t exist to measure electricity by time, it is axiomatic that no time based billing is possible.

Demand Response is now a priority of the United States Congress, the U.S. Department of Energy and the New York State Public Service Commission.

The City of New York depends on Demand Response for its projections of electric capacity availability through 2012. Developing an advanced meter installation and automatic meter reading protocol, that does not cost consumers money up front, will empower consumers to impact the City’s electricity environment. The benefits of a robust demand response paradigm are:

1. Less pollution as dependency on least efficient, most polluting plants is reduced;

2. Lower prices as the most costly plants will be relied upon less frequently.

3. Stretching the impact of new power plants to satisfy a greater portion of existing load.

The City of New York has endorsed Real Time Pricing for some time. This resolution will allow the PSC to enjoy council support to promote RTP and demand response to the public at large. The penetration of advanced meters in New York State is only 1/10 of 1% according to the Federal Energy Regulatory Commission (FERC). Yet in neighboring Pennsylvania the percentage of advanced meters exceeds 52%.

One reason New York State is near the bottom for all States is because we have yet to acknowledge that RTP is beneficial for small utility customers, and that these small customers can make a difference in the way power is supplied and priced.

Resolution 425 implicitly recognizes the growing discretion regarding electricity use timing of the City’s vast residential sector.

We recommend that the resolution be enhanced to include single-family homes as well as direct metered apartments, which are similarly affected by the present inability to have advanced utility meters installed for billing. T

he residential sector has the ability to shift usage from times where electricity prices are high and supplies are short. More of us work from homes than ever before and the ability to run dishwashers, answer E-mails and vacuum the floor can all be done when electricity is less expensive and simultaneously its generation is less deleterious to our environment.

Once New Yorkers are permitted to save, by changing electric consumption patterns they will figure out the best ways for themselves to realize the savings. And everyone will benefit in the process.

Finally, the blackout that plagued areas of Queens highlights the need for competitive metering, Real Time Pricing and Demand Response. Nobody knows what straw will break the camel’s back for either the supply or delivery of power. Thus RTP is essential to trigger consumer responses when the threat of power emergencies exist. Pricing power at the same amount throughout the day is testimony that the existing consumer electric pricing system is not conducive to preventing blackouts.

For all of the reasons stated above on behalf of the Cooperative Coalition to Prevent Blackouts and Energy Investment Systems we strongly support Resolution 425 and urge its unanimous approval by the City Council.

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