Still Fighting for Real-Time Pricing

Four years ago, attorney and energy advocate Peter Funk, then a board member of his 48-unit co-op at 100 Central Park West, achieved a breakthrough with his cooperators. If they switched from using their high-energy appliances in the middle of the day to mid-morning or mid-evening, they could achieve substantial reductions in their electricity bill. It took months of hard work, memos, and meetings, but eventually, the “ah-ha” moment came in a shareholder meeting. A single cooperator connected the dots – if she started running her dishwasher before 11 A.M., the cost in kilowatt-hours would be less than if she flipped the switch in the late afternoon? “Absolutely!” Funk replied, and the building’s cooperators were sold. Real-time pricing (RTP), marrying individual consumer use of electrical power to the times of day when New York State’s electrical grids were operating below peak demand, had arrived. The cooperators were sold on energy efficiency.

Today, Funk, no longer a board member but still an RTP advocate, remains upbeat about his co-op’s successes. During the two years that his building was on RTP, the co-op shaved 30 percent off its electricity bill during one power emergency and 40 percent during a test energy curtailment event.

The math is simple. Explains Funk: “If you have a significant number of people using RTP, you will significantly lower costs. The idea is to get a lot of people involved.” And therein lies the rub. For while the math is simple, the economics are not. Even though a majority of cooperators at 100 Central Park West made a concerted effort to use electricity during the most cost-effective times of day, the battle was uphill almost as soon as it was engaged.

There were three big hurdles. First, every unit had its own air conditioner, so it was incumbent on the individual cooperator to check his air conditioning usage. Some turned down the dial, others conspicuously did not. Then, fuel costs rose dramatically in the summer of 2005 – energy to power the state’s electricity grid spiked on the worldwide market – so despite shareholders reducing their energy consumption, the building’s total electricity bill was thousands more than it had been the year before. Finally, there was the inherent conflict between New York City’s electricity usage and individual consumer usage – the biggest sticking point ultimately became an insurmountable obstacle. With 100 Central Park West now on a pricing scheme that fell and rose with the hourly market demand, even if Funk’s cooperators reduced consumption, they were hard hit when the city as a whole experienced a demand spike.

The problem comes down to hourly pricing, and public will, maintains Funk, whose feeling is echoed by Greg Carlson, executive director of the Federation of the New York Housing Cooperatives & Condominiums and the founder of the Coalition to Prevent Blackouts.

“It seems to me [that from the government, except for the mayor’s office], there is a lot of pushback” to creating RTP rates that profit the individual consumer, says Carlson. He points to the high tariff rates that RTP consumers pay when New York City is at peak demand from noon until 6 P.M. Even though the RTP customers have reduced their own energy usage, there is no concerted effort to create a tariff rate that allows residential consumers to consistently benefit from their own reduction in energy consumption.

A large part of the problem, say several energy advocates, is that New York State has backed away from its original commitment to make purchasing electricity more user-friendly. After the blackout in August 2003, the New York State Energy Research and Development Authority (NYSERDA) began advertising its willingness to fund the cost of submeters and interval meters, which allow cooperators to see how much energy they use, on the hour or even in 15-minute intervals. By encouraging buildings to master-meter, submeter, and interval meter, NYSERDA was helping people see the direct benefits of their conservation efforts. Like the cooperators in Funk’s building, those who reduced and switched their time of electricity use started to experience savings.

The snag came with the differential in the load on the state’s power grid. While the state’s load was low in the afternoon, overall, for the city of New York, it was and remains high – so even if one building or four or ten reduced usage from noon to 6 P.M., the overall usage fee at that time was twice as high as what individual residents had paid on their regular, hourly Con Edison 19-percent-per-kilowatt-hour bill. And the RTP’s lower kilowatt-hour rates (less than 10 cents in the morning and 17 cents at night) did not make up the difference.

The key is better price tariffs for consumers, says Lewis Kwit, president of Energy Investment Systems, which helped Funk and Carlson track and bill cooperators for their individual real-time pricing usage in their buildings.

While Kwit has switched his efforts toward overall building conservation methods to help co-ops reduce their energy bills, Carlson and Funk are vocal in their frustration that the Public Service Commission, Con Edison, and NYSERDA have left RTP consumers flailing in an energy market that could be simplified and made cost-effective for their needs. In particular, the two men point to NYSERDA’s new policy, in which a building must show significant reductions in its overall energy costs before it will install submeters to track electricity usage.

Ryan Moore, a spokesman for NYSERDA, acknowledges the policy. The agency still helped to defray the costs of the installation of submeters and interval meters. “But the building must go through our multi-family performance program, and reduce its energy by up to 20 percent,” he says. “We really don’t care how they do it.”

For Carlson, the issue is one of political will and public demand. Despite the $22,000 spike in electricity costs in 2005, a building he manages in Queens, the Fairview, has stuck with real-time pricing. Carlson and the board believe in its long-term effectiveness, and have made investments to move it along. The 424-unit co-op shuts down nonessential components of the central air-conditioning system during peak demands on the state’s electrical grid, reduces the number of elevators in use and has switched all the interior lighting to low-cost, long-lasting light bulbs.

Over time, Carlson believes the building will recoup the money it lost in the spike in fuel prices in 2005, and has already seen the results of its energy-consumption preparedness: 10 to 12 percent savings during times of peak demand on the energy grid.

Changing a consumption habit takes time – for individuals, for whole buildings, and even for public agencies charged with looking out for the welfare of state taxpayers, and pressure. Public lobbying is still needed.

“Look how long it took for the telephone company to explain to us our options,” says Carlson, referring to when the Bell Atlantic phone monopoly broke up. It took years of public pressure and lobbying Congress for the individual telephone companies to come up with competitive plans for individuals to choose among, allowing people to save money by reducing and switching their usage to nights and weekends. The same holds true for real-time pricing, argues Carlson, who adds: “It will put control in the hands of the shareholders on an individual basis.”