Tech drives market changes

Armed with new technology and competitive rates, the electric-utility business is on the verge of making over the way it distributes energy and bills its customers. Some parts of the country are further along than others, but Rhode Island is one of the leaders, being one of only 25 states with “smart grid” legislation, which facilitates alternative power-supply agreements.
The Ocean State deregulated power in 1996 (following the National Energy Policy Act of 1992) and established retail choice for large industrial customers beginning July 1, 1997, with small industrial customers following suit as of Jan. 1, 1998.
At first the deregulation enabled power suppliers to compete purely on price. Later, suppliers began to tempt industry with long-term contracts using fixed prices. Now, smart electricity meters and real-time pricing offer the latest in managing electricity use and cost.
National Grid, for example, charges the same rate during peak hours as in the middle of the night. Not so for “nonregulated power producers,” advisers that buy electricity elsewhere yet sell it to commercial buyers at an agreed-to, and often cheaper, price.
Enabling this market is the so-called “smart grid,” a distribution network that uses two-way communications, advanced sensors and controls, advanced meters, and computers that monitor electricity supply and demand, and can reduce customers’ energy use (and cost), while at the same time improving the efficiency and reliability of the electricity grid.
At the power-purchasing end of the system, “smart” meters record consumption of energy in intervals of an hour or less and communicate that information to the utility for monitoring and billing purposes. This two-way communication allows for pricing that varies depending on the time of day, week or month that a customer draws on the power. It also helps National Grid operate its electricity network more efficiently and reliably for the benefit of all its customers.
But while some energy purchasers work directly with National Grid on controlling its costs, third-party brokers are helping companies make the best deals with alternative energy suppliers while taking a more informed approach to when they use (and are charged for) electricity. Two such companies operating in Rhode Island are Freedom Energy Logistics LLC of Manchester, N.H., and TransCanada Power of Westboro, Mass. Some of FEL’s clients include Roger Williams Hospital of Providence and Our Lady of Fatima of North Providence, both part of CharterCare Health Partners, and The Westerly Hospital. The company serves 60 clients in the New England area. At Our Lady of Fatima, the hospital saves about $150,000 per year, according to Ray Hutnak, the executive director of support services for CharterCare Health Partners. “We’ve used FEL as our agent since 2006,” he said. “They helped us set up an LLC to purchase the power from ISO-New England. It was not a simple process and involved extra paperwork with the state.”
That complexity often causes hesitation among power purchasers, says FEL Founder and Managing Director August “Gus” Fromuth. “There is a factor that causes the end user in the physical plant to glaze over when you get into the intricacies of how this works,” he said. “But if [customers] are willing to look at it, they will be able to quantify some impressive savings.”
FEL Power caters to commercial sources and the only modification is that new electric meters that measure on an hourly basis must be installed for the program, which allows for the correct price to be applied at billing time.
“We provide meters that can tell what a customer is using at a given time,” said David D. Graves, a spokesperson for National Grid. “The subject arises, sometimes frequently, about where companies can buy their electricity and what the advantages and disadvantages are, including the kilowatt per hour cost and the length of a long-term contract.”
However, taking advantage of that kind of information is not something that all of National Grid’s customers want to do. “Some customers,” said Graves, “particularly the larger customers with tremendous demand, want to know years down the road how much they will be paying for electricity so they can anticipate the costs.” With real-time pricing, a customer is charged more for electricity at peak periods when production costs or wholesale spot market prices increase due to high demand and is less for off-peak periods when there is likely to be a larger surplus of electricity and lower demand.
TransCanada Power is different from FEL in that it is an actual energy supplier. It has been actively involved in competitive electricity sales for industrial and commercial facilities since national deregulation. “We presently provide retail electric service to 70 large commercial and industrial customers in Rhode Island, including manufacturing facilities, colleges and universities, and hospitals,” said Michael E. Hachey, vice president for regulatory affairs. Ocean State Power in Burrillville purchases 560 MW, but Hachey declined to identify any other users due to possible confidentiality agreements.
Yes, the technology has improved, says Hachey, but he reports a similar experience to what National Grid’s Graves does. Most of TransCanada’s clients prefer the stability of a long-term fixed rate to fluctuating real-time readings.“ because they would like to fix their costs. There’s been a lot of ups and downs in this market over the last decade.”
But he believes the program eventually will have a positive impact, i.e., lower customer bills and contribute to lowering peak usage at a modest system-wide cost. For example, in one variation on the smart grid, a customer’s equipment is directly hooked into the utility’s communication system and interrupted or cycled on and off for a few hours during critical peak periods. In return, the customer who chooses to participate may enjoy the benefit of reduced usage on the monthly bill, and a customer reward provided as an incentive to participate in the demand-response program. •

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