- The Washington Times - Tuesday, January 23, 2007

BALTIMORE (AP) — Baltimore Gas and Electric Co. is offering a new package of incentives to encourage customers to conserve power, and it plans to install “smart” meters at every home — a process that will take years.

The company will reward customers for shifting their power use to off-peak hours and will expand existing programs that pay customers to let the company remotely control air conditioners and water heaters on days when energy demand is high. The plan was filed yesterday with the Maryland Public Service Commission.

In addition, BGE will implement more extensive conservation programs that pay customers for replacing older appliances with high-efficiency models.

The initiatives come as the company is phasing in a sharp rate increase that has led General Assembly lawmakers to rethink electricity deregulation. The utility joins a growing number of energy providers that are turning to smart meters and other so-called “demand response” technology to cut costs and trim peak demand for power.

“At the end of the day, you’ll pay less than you would have paid had we not done this,” company President Kenneth W. DeFontes Jr. said.

Smart meters work in part by allowing utilities to remotely measure a customer’s power use, eliminating the need for meter readers. That makes it easier for utilities to offer pricing schemes that reward customers for, say, not running the dishwasher until evening.

The plan’s success will depend on the willingness of customers to sort through a variety of pricing schemes and take control of their energy use, which some critics say customers will be unlikely to do.

“Some customers, especially the residential class, I don’t think will be interested in it at all and are probably willing to pay just a bit more to keep it simple,” said Ken Rose, an independent utility consultant in Columbus, Ohio.

But utility officials and state regulators see the technology as a promising way to manage Maryland’s growing energy demand at a time when no new power plants are being built.

Maryland imports nearly 30 percent of its power from neighboring states and is especially vulnerable to swings in the wholesale energy market.

During the peak afternoon hours of a heat wave, the market price of electricity can soar from $80 or less per megawatt hour to more than $1,000 because utilities are forced to turn on expensive generators to meet demand. The prices are linked to the most expensive power in use.

Reducing peak demand by just a few percentage points can lower rates significantly and reduce the need to build more power plants, energy analysts and consumer advocates say.

“Those peak times really drive up the price to everyone,” said Theresa Czarski of the Maryland Office of the People’s Counsel.

Mrs. Czarski said the group will examine the company’s plans to make sure the potential savings to consumers outweigh the substantial capital investment required.

The company will start a roughly $10 million pilot program later this year to install smart meters in about 5,000 homes. A smaller number also will get new programmable thermostats and remote-control switches for appliances.

If the company expands the program across its service territory, customers could be asked to pay up to $450 million for new equipment, with the expectation of getting a much larger return over time. The cost would be factored into the company’s electricity-delivery charge.

A similar program by Pacific Gas and Electric, in California, resulted in a temporary 1 percent rate increase, but proponents say the program will pay for itself several times over.

“We wouldn’t do any of these programs if we didn’t think they were going to save money,” Mr. DeFontes said.

Industry analysts say success will depend on whether the financial incentives are attractive enough to motivate customers to participate.

One incentive might be lower rates for customers who agree to reduce usage during peak hours on the hottest days every summer. Customers would be notified when to reduce power, either by e-mail or by a signal sent through a smart thermostat.

The company has about 100,000 customers on a similar but less sophisticated program, which offers a small reward to those who cut power use during peak hours. The new program will offer more options and greater financial incentives, Mr. DeFontes said.

About 200,000 of the company’s 1.1 million residential customers now participate in a program that allows the utility to turn off air conditioners and water heaters temporarily on hot days. The utility hopes to persuade more than a third of its customers to sign up over the next three or four years.

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