Shedding light on consumer electric bills

July 21, 2008 

When it comes to effective strategies for reducing their home electric bills, most consumers are in the dark — an unwelcome position with rising energy prices.

Monthly electric bills typically indicate only the “amount owed” and number of kilowatt hours used, neither of which provides consumers with guidance on effective cost-reduction strategies. In addition, meters are not always read monthly, so that consumers can go 60 days before learning an air conditioner has inexplicably become an energy hog.

Another complication is that many utility bills are calculated by averaging the cost of generation over all hours in a day and over many days. Because the price is averaged, consumers can’t tell which of their actions or appliances may have influenced their electric bills. Although residential customers in total account for more meters than their commercial and industrial counterparts, they use less energy per customer. That may be why utilities’ energy-monitoring programs developed to help big users control costs and improve operating efficiencies rarely have trickled down to residential consumers.

But faced with soaring and volatile fuel prices, consumers need immediate and detailed information about their energy use so they can determine how to manage their consumption. The goal of providing that information to consumers ought to be an integral part of any national or state energy policy as well.

On the surface, utility companies offer dozens of tips to reduce use on Web sites and in inserts with monthly bills. “Turn off lights when leaving a room,” “remove all meal ingredients from the refrigerator at one time” and “use cold water for washing-machine rinse cycles” frequently show up as ways of controlling energy costs.

Many utilities, as well as the U.S. Department of Energy, also provide online tools so that consumers can estimate the cost of operating everything from appliances to electronics or the savings from switching to compact fluorescent bulbs.

But because these reduction strategies are not tailored to individual situations, consumers can only guess at the dollars-and-cents impact of lowering the temperature on their water heaters or raising the thermostat on their central air systems. Guesswork also is involved in figuring out whether it makes sense to upgrade the refrigerator or replace an equally old electric range.

Recent studies and pilot projects show that like commercial and industrial customers, residential consumers who are given detailed, real-time information on their consumption will reduce their overall use by as much as 10 to 15 percent. Reductions during peak demand — those times when electricity use is highest — are even more dramatic. In a pilot project by New Jersey utility, Public Service Electric and Gas Co., consumers who knew the real-time price of electricity slashed their consumption by 47 percent during peak periods.

“Smart” meters that enable customers to control their appliances from pool pumps to air conditioners are one means of helping consumers make real-time decisions in their homes or remotely about managing use. Armed with this information provided on in-home devices and over the Internet, consumers in deregulated states where the price of electricity is set by the market can choose to maintain their normal consumption patterns or opt to wash clothes or dishes at the time when the per-kilowatt-hour price is the lowest.

But even residential customers in regulated states can use these meters to see how lowering the heat or turning off a room air conditioner can dramatically reduce electric consumption.

Interest in advanced metering technology is growing with pilot projects for residential customers planned or underway in Baltimore, Houston, Dallas and Washington, D.C. California has the most ambitious project with a statewide mandate for new meters to be completed by 2011.

Other utilities and states need to follow suit as the benefits of better energy management extend beyond lower bills for consumers. The more residential customers who cut use, the less strain on the nation’s aging electric distribution grid. Few brownouts and blackouts would occur. Reducing demand by individuals could even reduce the need to construct new generation plants, the costs of which will be passed on through monthly bills.

None of those can occur if residential consumers do not have access to more information about their electric use. Only when we understand the dollars-and-cents effects of our patterns of electricity consumption will we see the light and begin to use energy more wisely.

Amy Glasmeier is professor of economic geography at Penn State and director of the Center for Policy Research on Energy, Environment and Community Well-being. The opinion of the columnist does not necessarily reflect the viewpoint of the university.

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