The Times They are a Changin’: A New Age of Communicating Rate Options

Updated: Jul 16

I just had my electricity changed to a time-of-use (TOU) plan. The price I now pay for my electricity is dependent upon the time when I use it. Sounds simple doesn’t it. But, sadly it really isn’t.

My rate has 3 different time periods with different prices:




These time periods vary by day of the week:

● From Monday to Friday:

○ 12am to 6am is SUPER OFF-PEAK

○ 6am to 10am is OFF-PEAK

○ 10am to 2pm is SUPER OFF-PEAK

○ 2pm to 4pm is OFF-PEAK

○ 4pm to 9pm is PEAK

○ 9pm to 12am is OFF-PEAK

● On weekends and holidays (defined separately):

○ 12am to 2pm is SUPER OFF-PEAK

○ 2pm to 4pm is OFF-PEAK

○ 4pm to 9pm is PEAK

○ 9pm to 12am is OFF-PEAK.

Pricing also varies by season. Winter runs from November 1st to May 31st, the rest of the year is Summer. In Summer, prices are considerably higher than Winter for all time periods, as are the differences between time periods. Did I mention that pricing also varies by tier of consumption? Prices are cheaper up to 130% of baseline, and more expensive above it.

Did you understand all that? I work in the industry and I am not sure that I do!

Doing the Right Thing

The good news is that my electric utility made my life a little bit easier. The change to my rate was communicated well in advance. Just prior to the change, I received estimates of what my electricity bills would be with the new rate compared to my other options. They even guaranteed that, no matter what rate I chose, I would be no worse off at the end of my first year.

It took me all of one minute to make my decision.

People have strong opinions as to whether or not their utility is trying to do the right thing by them. In my career, I have worked across many industries, and over the last 15 years with many utilities. My overwhelming impression is that utilities try really hard to do the right thing by their customers.

As an industry insider, I know that the large investor-owned electric utilities operating in regulated markets don’t make their money by charging customers more for their electricity. Instead, with agreement from regulators, they can recover the cost of this electricity, reasonable operating costs, and a rate of return on their capital investment - most of which is invested in critical infrastructure.

These utilities have little incentive for customers not to be on their best rate. In fact, assuming that finding the best rate for each and every customer will increase customer satisfaction, they have every incentive to make that happen as demonstrated by JD Power.

It Ain’t Easy

The good news - customers have more rate choices than ever before. The bad news - rates have never been more complicated. Under such circumstances, rate comparison capabilities have never been so important. But why have rates become so complicated?

Utilities are introducing new rates to leverage investments in smart meters, encourage behavioral change, increase solar installations, drive (every pun intended) adoption of electric vehicles, and incentivize participation in energy efficiency and demand response programs. Consequently, we are seeing an increase in the frequency of rate cases, and customers being offered more choice than ever before.

Before offering new rates, utilities must design the new rates and answer multiple questions about them including:

● What impact will these have on existing revenues?

● How will these new rates impact different groups of customers?

● How will these rates impact each individual customer?

● Which customers are most likely to benefit from the new rates?

● Which customers will likely not benefit unless they change their behavior?

Existing billing systems struggle to provide the answers to such questions. Utility bill calculations are by their nature data intensive. These systems were designed to bill a subset of customers monthly, on a nightly basis, usually with only a single meter reading per customer.

With the introduction of smart meters, utilities now have between 720 and 2,880 meter reads per customer per month, and each bill may have ten or more line items. To accurately answer the questions above, a utility must simulate 12 months of billing for each customer. Now imagine doing that for 100,000 customers, each of whom have three rate options. The numbers are staggering.

● That’s 12 bills each for each customer or 1,200,000 bills.

● With just ten line items on each bill that would be 12,000,000 line items.

● Using hourly intervals that would be 8,640 intervals per customer, or 864,000,000 across all customers.

● Using 15 minute intervals that would be 3,456,000,000 across all customers.

Even if the existing billing system could just about do that, what impact would that have on other day to day responsibilities such as supporting agents in the contact center, managing field service appointments, resolving billing exceptions, processing payments, customer collections and disconnections? It is no surprise that utilities are turning to solutions known as Enterprise Rating Engines (ERE’s).

ERE’s can deliver high speed, accurate, complex rate calculations for individual customers, groups of customers, and whole customer populations. Unlike existing billing systems, they are designed solely with this purpose in mind. By using an ERE, utilities can equip themselves with the capabilities needed to design, get approval for, implement, market and drive adoption of new complex rates without the need to replace their existing billing system, something that typically only happens once every 15-20 years.

In Conclusion

With customer choice expanding, and rates becoming increasingly complex, existing billing systems lack the capabilities needed for comprehensive bill comparison.

Wanting to do the right thing for their customers, utilities are looking to Enterprise Rating Engines to empower customers to choose their best rate.


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