Commissioner, did you pay the electric bill!?

By
Branko Terzic

Fortnightly December 2015

https://www.fortnightly.com/fortnightly/2015/12-0/commissioner-did-you-pay-electric-bill%C2%A0

 

It may come as a surprise to some people that demand side management (DSM) programs are not new to the electric utility industry. While arguably the most effective peak management tool was the invention of commercial and industrial interruptible service and tariff offerings, electric utilities also introduced effective residential peak shaving programs in the 1970’s as well. I know as I had direct experience with one when I was a young and new Commissioner on the State of Wisconsin Public Service Commission (PSC) in the early 1980’s.

One very hot August afternoon in 1984, while I was at the PSC offices in Madison, my telephone rang with a rare long-distance call from my wife Judy at home in suburban Milwaukee. The call went something like this: 

“Hi honey, what’s up?”  

“I’ve got a problem with the hot water heater. What’s the name of our plumber?” 

“It's Fritz the Plumber, I think they’re all called Fritz.” 

“It’s not funny, I’ve got a load of diapers piling up and the water heater stopped working?” 

At the time we had two kids in diapers and one on the way, so she was in no mood for humor. 

“Wait Judy”, I said, “I just remembered something. The electric company probably turned off the electricity to the water heater.” 

“Geez, honey, you’re the PSC commissioner and you forgot to pay the bill. How’s that going to look?” 

“No, no” I explained, “When we moved in a few years ago I signed up for the interruptible water heater service and that’s probably what happened. It’s the hottest day of the year and they needed the electricity elsewhere on the system.” 

“What do we get,” she replied, “for the inconvenience?” 

“Oh, we get ten bucks.” I answered proudly. 

“Good” she said, “Give me the ten bucks when you get home cause I’m the one with the smelly pile of diapers.” 

The next day she called again. 

“Hey, they turned the hot water off again.” 

“Yeah, It’s gonna be hot for a few days.” 

“Well, I’ll take that ten buck tonight too.” 

“Sorry honey its ten buck a month, not every time they disconnect the water heater!” 

“Well, then it's not worth it.” I recall her saying as she hung up the telephone. 

The lessons? It’s about elasticity of demand and valuation. We had been living in that house up to that time for about six years. Most of that time both of us were working and did not notice any interruptions in electrical service during the day. Then, with one parent home with two babies, our consumption patterns changed and so did our valuation of the interruption. Ten dollars a month was fine at one time when we were not inconvenienced, but now we wanted more for the inconvenience, so we went off the program. 

Looking back, I don’t know how that kind of signal would have been interpreted by the utility or the regulator.  Today, DSM is considered by many as an optimum solution to matching supply and demand, rather than increasing reserve margins. In the end the consumer should decide rather than the utility, regulator or politician.