APPENDIX 8C. COMPARISON OF MARGINAL PRICES FOR TOU AND DEFAULT

TARIFFS

TABLE OF CONTENTS

8C.1 INTRODUCTION ...................................................................................................8C-1

8C.2 COMPARISON OF TOU AND DEFAULT TARIFF MARGINAL PRICES .......8C-1

LIST OF TABLES

Table 8C.2.1 Whole building energy consumption fo r July (CD is census division) .......8C-2

LIST OF FIGURES

Figure 8C.2.2 Comparison of the effective marginal price for each account. ....................8C-3 Figure 8C.2.3 Effective marginal prices for all accounts, organized by census

division .........................................................................................................8C-4

8C-iAPPENDIX 8C. COMPARISON OF MARGINAL PRICES FOR TOU AND DEFAULT

TARIFFS

8C.1 INTRODUCTION

There is a concern that the electricity prices used in the life-cycle cost (LCC) and payback period (PBP) analysis do not reflect the real cost of serving system-peak coincidentloads such as air-conditioning. There have been suggestions that basing electricity costs on timeof-use (TOU) tariffs would provide a more realis tic picture of the real value of reducing peakcoincident electricity use. To investigate this issue, the Depa rtment conducted an analysis to compare prices derived from default (i.e. non-TOU ) tariffs and TOU tariffs, described in this Appendix. The tariff data were collected as part of the Tariff Analysis Project (TAP) database update (see appendix 8-B).

8C.2 COMPARISON OF TOU AND DEFAULT TARIFF MARGINAL PRICES

Many utilities offer optional TOU tariffs, but for the moment there are no utilities which have mandatory TOU tariffs fo r residential customers. The Federal Energy Regulatory Commission (FERC) 2008 staff report on demand res ponse provides a figure (Figure III-15) that indicates approximately 1.2 million reside ntial customers are on TOU tariffs. 1 Based on the total residential consumer count from the Energy Information Administration (EIA) Form 861 (2007), 2 this represents less than 1 percent of all co nsumers. The penetration of TOU rates is thus still very low. For this reason, the Department does not include TOU tariffs in the sample used to develop electricity prices for the LCC.

Optional TOU tariff are included in the TAP database for all utilities that offer them. Currently, 48 of the 102 utilities in the sample o ffer TOU rates. These optional TOU tariffs are

used here to determine whether the difference in electricity prices fo r TOU vs. non-TOU tariffs is significant for this rule-making. This determination can only be made for current rate structures; it may be repeated in the future as rate structures continue to evolve.

Each utility defines the hours associated with TOU periods (on-peak, off-peak and shoulder) differently. To correctly calculate electricity bills for TOU tariffs therefore requires hourly whole-building electricity consumption data . For this analysis, these data were obtained from EnergyPlus building simulations. 3 The simulations use a prototype residential single-familydetached home, with a central air conditioning (CAC) system and gas furnace, sited in twentytwo different weather locations. Two sets of simu lations were performed, with CAC efficiencies

of 13 SEER and 16 SEER. Both assume a single-speed air conditioner.

As in the LCC, a set of customer accounts ar e defined by pairing each residential building with all utilities in its region. For the analysis presented here, regions are defined as census divisions. For each building-utility pair, monthly utility bills are calculated using both the default

8C-1tariff and the TOU tariff (utilities that do not offer TOU tariffs are not included in this analysis). For each account, the electricity cost savings are defined as the difference between the bill in the 13 SEER case and the bill in the 16 SEER case. The energy savings are defined similarly. The effective marginal electricity price is defined as the ratio of the bill savings to the energy savings.

The output of this analysis is summarized in Table 8-C.2.1 and Figures 8-C.2.1 and 8

- C.2.2. Seasonal rates can be represented by looking at data for January and July. For the month of January the energy savings between 13 and 16 S EER are essentially zero, so only data for July are presented. Table 8-C.2.1 shows, for each locat ion, the monthly energy use in July in the 13 and 16 SEER cases; the energy use is for the whole building, but the difference between the two is due to CAC only. The energy savings are also given as a percentage of the 13 SEER whole building load.

Table 8C.2.1 Whole building energy consumption fo r July (CD is census division)

City State CD kWh SEER 13 kWh SEER 16 kWh Savings

Boston MA 1 1177 1064 9.6%

New York NY 2 1432 1282 10.5%
Chicago IL 3 1427 1279 10.4%
Kansas City MO 4 986 933 5.3%
Minneapolis MN 4 950 913 4.0%

Atlanta GA 5 1340 1184 11.6%

Miami FL 5 1234 1095 11.3%
Sterling VA 5 1202 1084 9.8%

Dallas TX 7 1460 1283 12.1%

El Paso TX 7 1200 1086 9.5%

New Orleans LA 7 1364 1210 11.3%

San Antonio TX 7 1292 1156 10.6%
Albuquerque NM 8 1207 1078 10.7%

Denver CO 8 953 893 6.3%
Las Vegas NV 8 1721 1468 14.7%

Phoenix AZ 8 2254 1872 16.9%

Tucson AZ 8 1605 1381 14.0%

Fresno CA 9 1529 1336 12.6%
Los Angeles CA 9 892 853 4.4%

Sacramento CA 9 1156 1053 8.9%

San Francisco CA 9 771 761 1.3%

Seattle WA 9 805 770 4.4%

Figures 8-C.2.1 and 8-C.2.2 summarize the out put of the price calculations. Figure 8

- C.2.1 is a scatter plot of the effective marginal price for the TOU tariff vs. the effective marginal price for the default tariff. Each point represen ts one account, i.e. one building-utility pair. A diagonal line is included in the pl ot for reference. The data show that there is no coherent pattern of higher prices for TOU tariffs; in fact there are cases where the effective price is substantially lower than for the default tariff. This pattern is confirmed in Figure 8-C.2.2, which shows the

8C-2default and TOU prices separately. The two sets of prices have been organized by census division for this plot. Figure 8-C.2.2 shows that the spread of TOU and default prices is comparable, with the exception of census division 4 (West North Central) where the TOU July price is substantially higher than the default price.

These data show that, currently, there is no significant difference on average between TOU and default tariffs for the electricity costs used in the LCC. This may be due to several factors. For current tariffs, the commodity pric e (cents per kWh) in different TOU periods is often comparable to the default tariff price, and if the on-peak prices are higher the off-peak or shoulder prices are typically lowe r. The distribution of energy savings across the different TOU periods also has a strong impact on the effective marginal price. For residential cooling there may be significant appliance use outside the utility’s peak hours (which tend to be week-day afternoons), which will m oderate the impact of higher on-peak prices.

0 5 10 15 20 25 30 35 40

0 10 20 30 40

Default price cents/kWhTOU price cents/kWh July y=x

Figure 8C.2.2 Comparison of the effective marginal price for each account.

8C-30 5 10 15 20 25 30 35 40

1 2 3 4 5 6 7 8 9 10

Census DivisionPrice cents/kWh July default July TOU

Figure 8C.2.3 Effective marginal prices for all accounts, organized by census

division

8C-4REFERENCES

1 FERC . Assessment of Demand Response and Adv anced Metering. Staff Report, Federal Energy Regulatory Commission , December 2008. Available at: http://www.ferc.gov/legal/staff-repo rts/12-08-demand-response.pdf

2 EIA. Energy Information Agency Annual Electric Power Industry Database Form 861

, 2007. Available at: http://www.eia.doe.gov/ cneaf/electricity /page/eia861.html

.

3 U. S. Department of Energy, EnergyPlus Energy Simulation Software . Available at: http://apps1.eere.energy.gov/buildings/energyplus /

8C-5