Systems Approach to Assessing Electricity Conservation Initiatives

Abstract

This paper reports on an integrated model of electric utility systems designed to analyze potential impacts of introducing certain conservation initiatives. The Rate Simulation Model can be used to assess in an integrated manner the economic, financial, technical, and environmental consequences of a wide variety of policies and regulations affecting electric utilities. It is a flexible tool for policy analysis, enabling the investigator to ask a wide range of “what if?” questions about future utility developments. The principal application here is to economic and financial impacts. In particular the model has been used to examine the impacts of implementing time-of-day and flat rate structures on utilities in the United States. This study indicates that time-of-day rates can accomplish their intended purpose of flattening utility load curves. However, unless carefully designed, planned, and implemented, such rates can have several unintended consequences. They may shift a greater proportion of utility costs to residential customers, resulting in higher costs for equivalent service than under continuation of traditional pricing practices. Implementing time-of-day rates will require investment in new metering and billing equipment that will probably outweigh any savings in new generating capacity over the short run. Time-of-day rates may discourage conservation-oriented end-use technology such as solar (a finding also suggested by Asbury and Mueller (1977)) and may lead to increased energy use by some customers.