The electric company games the system. So can you.

Note: This post talks about how to use the rates offered by Arizona Public Service (APS) to their best effect, but you can use these techniques with any public utility that offers different rates, especially demand rates. If you’re not particularly good at math, find a friend who enjoys playing with spreadsheets to compare and contrast the rates for you.

Yesterday I helped our neighbors decide which new electricity rate plan to choose because all of the old rate plans are going away. Making this more complex, at the same time the “average” residential bill is going up 4.5 percent, or $6 a month. What is an “average” bill, you ask? Obviously it’s not the one of the new “Premier Choice” plans (more on that name later), which is the (up until now) normal bill with the (up until now) normal energy charge that most people are familiar with plus a fixed daily billing cost. I know this because I ran the numbers for a couple different neighbors based on their historical usage for the last two years, and their bills would increase between 8 and 12 percent. (For one year, one neighbor would have paid over 20% for the same electricity usage!)

No, I suspect that choosing a Premier Choice plan is a mug’s game. Instead, most people’s best choice will be the Saver Choice plan, a Time of Use plan that has the fixed daily billing cost plus an energy charge that increases between the hours of 3 p.m. and 8 p.m (“peak” time).

Some few intrepid customers will discover that they’ll have the lowest bill with the Saver Choice Plus or Saver Choice Max plans, which have the fixed daily billing cost, an energy charge that increases during peak time AND a demand charge based on your highest hour of use during peak time. (Sounds complicated, doesn’t it? Not really, just don’t run the dishwasher and the washer and the dryer and the A/C all at the same time between 3 p.m. and 8 p.m. But it’s an unfamiliar term, so people will tend to stay away from it if they can.)

Were everyone to stay on the basic (Premier Choice) plan, APS’s projected 4.5% increase would be blown out of the water. However, APS isn’t lying when it makes that projection; it’s assuming certain choices on the part of customers, and it’s guiding customers to make those choices. The letter my neighbor received explained that the closest choice to his current plan would be the Premier Choice Large plan, but the most cost effective choice would be the Saver Choice plan. Like most customers, my neighbors will logically choose the most cost effective plan so long as it doesn’t take too much effort.

I get APS’s reasoning. Electricity is expensive when demand is high, and demand is high when everyone gets home from work and school. It would be better for everyone if that demand curve could be smoothed out at its peak, spreading usage more evenly throughout the day. And people are lazy where we can afford to be; it’s our nature, and it’s served us well over the millennia. Why go to the effort of lowering electricity usage at peak demand times unless we’re incentivized to do it? So APS is incentivizing us.

Keep in mind that APS wanted to force everyone onto a demand plan and was shot down by the regulators. So APS worked to persuade instead. I get the feeling that people at APS must have read the book Nudge by Thaler and Sunstein and put what they learned to good use.

Even the plan names—“Premier Choice” vs. “Saver Choice” vs. “Saver Choice Plus” vs.“Saver Choice Max”—nudge people in the direction APS wants. Of course a “Premier” plan will have a higher rate. Better to choose a “Saver” plan. And“Saver Choice Max,” what’s that? Max savings is good, right?

This is not new. Long before Nudge came out, my husband would offer people two choices: the choice he wanted people to take and the “fate worse than death” choice. Now there’s a snazzy name for it.

Persuasion is far better than force. Especially if a motivated customer can work the system. And systems like this are perfect for the motivated customer. First, the more complex rates have to be sufficiently cheap to attract lazy customers. Imagine what a motivated customer can do. It can be a bonanza! Second, the system contains brand new rates. That means the utility company hasn’t had a chance to refine the rates. Right now, the Saver Choice (Time of Use) plan has a SUPER OFF-PEAK time from 10 a.m. to 3 p.m. in the winter that’s a little over $0.03 per kWh, compared to almost $0.11 or even $0.24. That’s AWESOME, and easily gamed if you’re willing to put some effort into it.

What kind of effort am I talking about? These kinds:

Be willing to change. Most people are averse to change, but change is often an opportunity. APS is willing to charge people less if they use less electricity (and less electricity at one time) during peak hours. How much trouble would it be to run the dishwasher after 8 p.m.? Or do laundry only on weekends? Admittedly, it’s harder for retirees and people who work from home to lower their heating and cooling usage during those peak times, but that’s what a programmable thermostat is for. Speaking of which…

Get a programmable thermostat: In the winter, heat the house and/or program your appliances to work during the Super Off-Peak time. Crank the A/C in the summer until 2:59 p.m. and then let the house heat up until 8 p.m. when you can make it cool enough to sleep.

Get batteries: They don’t have to be Tesla’s Powerwall ($6,600 plus installation); some people use marine batteries. Program them to charge during the Off-Peak time, or Super Off-Peak time in the winter, and discharge during the Peak time. If you have enough batteries to cover all of Peak time, you may benefit from one of the demand plans.

Consider solar plus batteries: Sure, solar alone isn’t quite as good a deal as it was a year ago, but a combination of solar and batteries could still reduce your bill to the minimum fixed amount. You could even consider the Saver Choice Max (demand) plan WITHOUT HAVING TO MAJORLY CHANGE YOUR CURRENT USAGE AND HABITS. Just get a solar system that can cover at least 75% of your electricity usage (100% is even better if you can afford it), fill the batteries with solar power, and suck the electricity out of the batteries during Peak time after your solar system goes to sleep. You may never have a demand charge (the most expensive part of that rate plan), and what electricity you do buy from APS will cost less than $0.06 per kWh.

Be loud. Public monopolies like utility companies are particularly vulnerable to public outcry. When APS wanted to change the rules to the detriment of solar customers, we packed the statewide meetings. We sent in letters with thousands of signatures. We flooded email inboxes with our protests. We were a tiny percentage of total customers at the time, but we were so vocal in our protests that APS finally did the smart thing and grandfathered us into the old system. Since new solar customers would fall under new rules, APS guaranteed that our small yet vocal group could never get larger. At the time, there were fewer than 25,000 of us out of a total customer base of 1.2 million. That’s 2 percent. Can you imagine what damage we could have done if we’d grown to 5 percent? Yes, APS was wise to segregate us from everyone else. Keep us happy and keep us quiet.

 

Because we were willing to jump on the opportunity we saw back in 2013 when APS offered such generous rates to solar customers, we currently have an average monthly bill of about $14, we’ll have saved more money than we spent by June of this year, and we’re grandfathered into the old system for another 15 years, at which time I’ll have to put forth some more effort to get us the then-best deal.

Don’t let a lack of effort get in the way of your opportunity.

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