Dispelling time-of-day rate misconceptions
Last fall, we mailed everyone a Time-of-Day (TOD) Rate magnet showing our on-peak and off-peak hours for the calendar year. We have always been concerned that members may not understand the concept behind this rate.
Last spring, we conducted our annual customer satisfaction survey and asked members a series of questions regarding their familiarity with the TOD Rate. The results were encouraging. Eighty-three percent said they were aware of it, and the percentage rose to 93 after being prompted by the person conducting the survey.
Sixty-four percent said they were familiar with how the TOD Rate structure works, while 15 percent said they were not familiar. Fifty-six percent said they actively worked to minimize their electric use during on-peak hours, while 23 percent said they were not doing much of anything to reduce their use.
The results of the survey are pretty much what we expected when we began converting to digital meters and introduced the TOD Rate in 2010. This rate was designed around the average LMRE residential consumer’s electric use pattern. Our studies showed the average residential member uses about 72 percent of their power during off-peak hours. If average residential consumers can shift chores, such as running the dishwasher and clothes washer or dryer, to off-peak hours, they can save on their electric bill. If they can’t, they will most likely still pay the average cost. However, if members use more than the average consumer during peak hours, they will pay slightly more, and they should, since the cooperative experiences higher power costs on their behalf.
We have a summer schedule that runs May 23 to Sept. 22. The on-peak hours are 2 p.m. to 10 p.m. Monday through Friday. The winter schedule is Sept. 23 to May 22. The on-peak hours are 6 a.m. to 9 a.m. and 5 p.m. to 10 p.m. In 2010, we started with a 1 cent kilowatt-hour (kWh) rate difference between on-peak hours and off-peak hours. Once all the meters were installed, the rate spread was increased by one-half cent each year. It’s now at 3.5 cents per kWh and will end up at 4 cents next January.
After we mailed the magnets, one member sent us a letter claiming they were being “penalized,” since they worked a normal daytime schedule. The member added that their usual family evening functions did not allow them to shift power use to off-peak periods. That's understandable.
We reviewed the member’s electric bills for a 12-month period, comparing actual bills under the TOD Rate to the old rate schedule that we maintain in our cost-of-service studies as a “reference rate.”
This family’s monthly off-peak hours use exceeded 72 percent six times. For the year, the total percentage of their off-peak hours was 71.5 percent. That’s pretty close to the average use pattern.
When we got down to calculating the dollars and cents difference, they actually saved $6.11 by being on the TOD Rate compared to their use on the old reference ate schedule. What we don’t know is whether the family attempted to shift power use to off-peak periods.
“We can’t control when the actual peak hours of each month occur,” we wrote in our response letter to our member. Buckeye Power, Lorain-Medina Rural Electric Cooperative’s wholesale power supplier, assesses peak demand charges for the hour the peak was highest in five days of each month at the same time all of Buckeye Power’s members were peaking. In addition, we also receive a separate demand charge for the hour the peak was highest in five days during the months of June through September and December at the same time the PJM 13-state regional system was peaking. We have an idea when peaks might occur, but it’s like a cat trying to catch the light of a laser in a dark room. It’s hard to pin down.
We believe the Time-of-Day Rate is a fair way to recover the cooperative’s cost of service. Our members who can shift some of their power use to off-peak hours will be rewarded and can save some money. Now that the rate spread is 3.5 cents, there is even more of an incentive to try and shift power use to off-peak periods.
If members cannot or do not want to shift their power use, there is no penalty, provided their use is comparable to an average residential member. They will pay the average rate. They may even save $6.11 without even realizing it. We believe that’s fair.