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<title>December 2003: Real-Time Pricing in Oregon and New York</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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</center><p align="left"><b><u><br>
December 2003<br>
</u></b><font size="6"><b>Real-Time Pricing in Oregon and New York<br>
</b></font><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>3/</font><font size="2">12/21</font></p>
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<p align="left">The Oregon Public Utility Commission (“OPUC”) recently
approved a real-time pricing (“RTP”) pilot program for large customers with
demand greater than 1 megawatt of electricity. Portland General Electric
Tariff Advice No. 03-16, Allowed (November 14, 2003). In New York, most
utilities already offer voluntary RTP programs for commercial and industrial
customers, but the New York Public Service Commission (“NYPSC”) recently
found that these programs have low customer participation. Case No.
03-E-0641, Order on Expansion of Voluntary Real-Time Pricing Programs
(October 30, 2003). The NYPSC considered making the RTP programs mandatory
but instead ordered utilities to further promote their voluntary RTP
programs with enhanced customer education and outreach.<br>
<br>
Under real-time pricing, the customer pays variable prices for electricity
that approximate the actual market rate at the time the electricity is
provided rather than paying an average price. The principal perceived
benefit of real-time pricing is improved market efficiency. As the NYPSC
explains:<br>
<br>
Real-time pricing . . . allows customers to see and potentially respond to
high prices during capacity shortages and periods of peak demand. . . . [C]ustomers
who decrease consumption during high price periods will realize reduced
electricity costs. If a sufficient number of customers reduce their peak
period loads, the lower overall demand should result in lower electricity
costs for all other customers, as well. Thus, effective RTP programs will
benefit all customers, not just those participating in the programs. <br>
<br>
In view of the potential advantages of RTP, the NYPSC considered making RTP
programs mandatory, but declined to do so. Commenters opposed to mandatory
RTP pointed out that RTP subjects customers to potentially volatile prices
rather than the stable, average prices to which they are accustomed. Also,
“for some customers, achieving load reductions or shifting to lower-priced
periods could require sizeable capital investments for the installation of
comprehensive energy management systems or the addition of alternative
technologies.” Also, the ability of some customers to shift demand to
off-peak hours is limited by other business considerations. To reschedule
business operations, for example, “could increase other operating expenses
and perhaps create business inefficiencies.” The NYPSC characterized these
objections as “short-term impediments” and speculated that opposition to
mandatory RTP is “premised more on a misunderstanding of and apprehension
about RTP than on actual shortcomings of RTP.” Accordingly, the NYPSC
ordered the utilities to enhance their customer education and outreach
efforts to more effectively promote customer participation in voluntary RTP
programs.<br>
<br>
The Oregon pilot program begins with only six customer participants. The
utility will determine a baseline consumption level for each customer based
on the customer’s “historical usage pattern.” Participants will pay normal
rates for baseline energy use and “real-time hourly prices for additional
energy use (or they will receive credits at those prices for reducing use
below the baseline).” Participants who do not change their usage will pay
the same amount that they would have paid if the RTP program were not in
effect. The program begins in January of 2004 and first-year results will be
evaluated in April of 2005.</p>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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