Smart grid organizations, vendors and utilities constantly pay lip service to the consumer smart grid experience. Only a handful of utilities have gone so far as to both walk the walk and talk the talk. One of the best examples of this is Sacramento Municipal Utility District.

The utility has the advantage of not being investor-owned and it is run by a board of directors. It also received $127.5 million in stimulus grants. However, the goals of grid reliability, integrating renewables and increasing energy efficiency with a focus on customers provides lessons that nearly every utility could learn from, especially in the area of new pricing options.

Like many other utilities, SMUD started with smart meters. Unlike other utilities, SMUD always planned to use the two-way digital meters for dynamic pricing. SMUD has completed its smart meter installation, and as of December 2011, and more than 95 percent of customers were satisfied with their installation.

“I saw some of their numbers on people refusing meters, and it was so small,” said Kevin Jones, Smart Grid Project Leader at the Institute for Energy and the Environment at Vermont Law School, which recently completed a case study of SMUD’s smart grid plan. “I think a lot of that goes to the fact that SMUD has gone far toward building a relationship with its customers.”

The utility is now undertaking a two-year study, partially funded by the U.S. Department of Energy, to better understand and fine-tune its dynamic pricing, known as the SmartSacramento Pricing Pilot.

The pilot will hopefully provide insight not only for SMUD, but also other utilities looking to leverage their AMI networks to reduce peak. There will be more than 57,000 customers taking part in the study, with more than 11,000 on different dynamic pricing schemes and another 47,000 in a control group.

“It was definitely a huge effort,” said Jennifer Potter, project manager for the pilot at SMUD. “This is uncharted territory.”

The project, which was unique in terms of its size and design, was challenging both in terms of back-office logistics and customer engagement, even for a utility that traditionally has a fairly good relationship with its customers.

When it came to engagement, SMUD knew it was pushing out of its comfort zones, so it enlisted the help of marketing and advertising companies to hold focus groups and craft messages that were devoid of utility jargon. “Instead of focusing on the price going up three hours of the day,” said Potter, “it focused on a discount of 21 hours of the day.”

The utility was also ready with extra call center staff to field questions and concerns, but even after the first event, which was held last week, there has not been as much call volume from customers as had been anticipated.

One reason for the quiet phone lines is likely the utility's targeted websites. Each participant's web portal is tailored for the program that they are on. There is one plan that is critical peak pricing, where for 12 events during summer, the price goes from $0.07 per kilowatt hour to $0.75 per kWh for three hours. The average SMUD residential rate is around $0.09 per kWh.

Other plans include a dynamic pricing scheme where the rate is $0.08 off-peak during summer and then $0.27 per kWh from 4 p.m. to 7 p.m. on Monday through Friday. The last rate is a blend of critical peak pricing and dynamic pricing. Some people in the different price groups have in-home displays, but smart thermostats are not a part of the pilot. The in-home displays connect to the Silver Spring smart meters via ZigBee. There is no price guarantee built into the pilot, but Potter said all of the rates were designed to be revenue-neutral.

Each of the rate designs have people who opted in, and then people who were opted in by the utility, but can then choose to opt out. Opt-out rates have been very low, about 3 percent to 4 percent, according to Potter. The rates also have their own user-friendly names, such as Optimum Off-Peak and Summer Weekday Value Plan.

The websites and other marketing collateral also go further than just telling people about the details of their program and reminding them to pull down their blinds during the day. There are videos on hot-weather cooking tips, with recipe cards including pizza on the barbeque. The utility also gives detailed information on how to precool a home, rather than assuming people can figure it out themselves.

“We tried to work on how to take it out of utility-centric terminology,” said Potter. “This pilot is all about partnering with our customers.” The utility spent eight months recruiting customers, using everything from door hangers to emails to phone calls. As the program has moved towards launch, the utility has been honest with the participants that there might be some bumps in the road.

And there have been bumps in the road. Without commenting on specifics, Potter said that the first event allowed SMUD to identify some issues on the back end, especially with ensuring the system is capable of sending and receiving so much information at the same time. The utility is also integrating all of its customer information systems, demand response systems and metering management applications to run seamlessly together to support residential dynamic pricing.

Although SMUD has only called one event, Potter said there have already been two huge lessons learned. The first was the scope of the IT hours needed to integrate all of the systems. The utility had devoted what seemed like an aggressive amount of IT work, but there was still more needed.

The other surprise was how little customers knew. Many guessed their toaster was an energy hog. When SMUD learned just how little people knew about energy consumption, the utility provided charts of how much energy average appliances used and translated that into dollars. “There’s no transparency at all in electricity use,” said Potter. “People have no idea what’s driving cost.”

Although the pilot is only for two summers, for SMUD, this is a new way of doing business. “Our intention,” said Potter “is to keep moving as if this is never going to stop.”

Tags: demand response, dynamic pricing, peak shaving, sacramento municipal utility district, smart meters, smud, time of use pricing