The Oregon Public Utility Commission (“OPUC”) recently approved a real-time pricing (“RTP”) pilot program for large customers with demand greater than 1 megawatt of electricity. Portland General Electric Tariff Advice No. 03-16, Allowed (November 14, 2003). In New York, most utilities already offer voluntary RTP programs for commercial and industrial customers, but the New York Public Service Commission (“NYPSC”) recently found that these programs have low customer participation. Case No. 03-E-0641, Order on Expansion of Voluntary Real-Time Pricing Programs (October 30, 2003). The NYPSC considered making the RTP programs mandatory but instead ordered utilities to further promote their voluntary RTP programs with enhanced customer education and outreach.

Under real-time pricing, the customer pays variable prices for electricity that approximate the actual market rate at the time the electricity is provided rather than paying an average price. The principal perceived benefit of real-time pricing is improved market efficiency. As the NYPSC explains:

Real-time pricing . . . allows customers to see and potentially respond to high prices during capacity shortages and periods of peak demand. . . . [C]ustomers who decrease consumption during high price periods will realize reduced electricity costs. If a sufficient number of customers reduce their peak period loads, the lower overall demand should result in lower electricity costs for all other customers, as well. Thus, effective RTP programs will benefit all customers, not just those participating in the programs.

In view of the potential advantages of RTP, the NYPSC considered making RTP programs mandatory, but declined to do so. Commenters opposed to mandatory RTP pointed out that RTP subjects customers to potentially volatile prices rather than the stable, average prices to which they are accustomed. Also, “for some customers, achieving load reductions or shifting to lower-priced periods could require sizeable capital investments for the installation of comprehensive energy management systems or the addition of alternative technologies.” Also, the ability of some customers to shift demand to off-peak hours is limited by other business considerations. To reschedule business operations, for example, “could increase other operating expenses and perhaps create business inefficiencies.” The NYPSC characterized these objections as “short-term impediments” and speculated that opposition to mandatory RTP is “premised more on a misunderstanding of and apprehension about RTP than on actual shortcomings of RTP.” Accordingly, the NYPSC ordered the utilities to enhance their customer education and outreach efforts to more effectively promote customer participation in voluntary RTP programs.

The Oregon pilot program begins with only six customer participants. The utility will determine a baseline consumption level for each customer based on the customer’s “historical usage pattern.” Participants will pay normal rates for baseline energy use and “real-time hourly prices for additional energy use (or they will receive credits at those prices for reducing use below the baseline).” Participants who do not change their usage will pay the same amount that they would have paid if the RTP program were not in effect. The program begins in January of 2004 and first-year results will be evaluated in April of 2005.

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716