The Sacramento Municipal Utility District (SMUD) will begin transitioning to a default time-of-day rate structure on Oct. 1, 2018.
The new rates are designed to encourage customers to conserve energy and to better align costs for customer costs with utility costs. SMUD says it costs two to three times as much for it to provide electricity during summer peak hours as it does during non-peak hours.
SMUD also has rolled out a webpage and created an online video describing and explaining the rates and ways customers can save on their electric bills.
Under the new rates, customers will pay more for electricity used during summer weekdays from 5 p.m. to 8 p.m. and less during the rest of the hours in the day and on weekends and holidays. SMUD says its winter rates are lower than summer rates.
SMUD’s current rate structure is a blend of rates throughout the day. But as demand and pricing increases, it has become more difficult to fairly blend those rates, SMUD said.
Under SMUD’s current rate structure, off-peak prices are $0.1166 per kWh. Mid-peak rates, from noon to midnight Monday through Friday, are $0.1611. And on-peak rates are $0.2835 per kWh.
The new rate structure is designed to give customers the price signals that will provide the impetus for them to shift or reduce their energy usage to non-peak hours.
The utility expects about half of its customers will save money under the new rate structure. The other half of its customer base may see a “minimal” increase if they don’t reduce, SMUD said, adding that the change would be revenue neutral from the utility’s perspective.
SMUD has offered TOU rates to customers for years and says the results have been “great” in terms of customer satisfaction. For those customers who may have trouble shifting their energy usage, SMUD says it will offer an alternative fixed rate that offers a more consistent bill, but it would be about 4% higher overall hours of the day.
SMUD said the time-of-day rate transition is expected to be complete by May 2019. Thirty days prior to the switch, customers will receive a notification letter and a rate comparison report, along with a welcome packet and follow-up communications to ensure that customers can make changes that best fit their home and lifestyle, the utility said.
Many California utilities are shifting to time of use rates as the state adjusts to changes in its generation mix as a result of higher levels of renewable energy resources, especially solar power which peaks during mid-day, pushing other resources off the system, but then fades in the afternoon, requiring quick ramping, often gas-fired generators to respond quickly to serve evening load.