FTC Staff Advises District of Columbia Public Service Commission On Dynamic Pricing Proposal for Residential Electricity Customers

The Federal Trade Commission staff submitted a reply comment in response to a request from the District of Columbia Public Service Commission (DC PSC) for comments on Potomac Electric Power Company’s (Pepco’s) proposed dynamic pricing program for residential customers.

Pepco’s proposal would offer cost savings to customers who respond to incentives to reduce electricity consumption during peak demand periods – incentives made possible via use of devices such as “smart” electric meters.  The FTC staff comment encourages the DC PSC to adopt the proposal as “a constructive initial step toward improving the efficiency of the electric system in a way that can benefit many customers but also leave the existing price structure in place for customers who do not (or cannot) respond to the efficiency incentives.”  It also recommends that the DC PSC “periodically review the effects of the proposed approach with a focus on the accuracy of the price signals being conveyed, consumer participation in and satisfaction with the program, and methods to enhance consumer participation and satisfaction over time.”

“It is particularly appropriate,” the comment states, “to provide incentives (in the form of bill savings) to customers who trim their electricity consumption from the grid when it is stressed by unusually high demand, and who thereby help utilities and grid operators to meet the challenge of continuously balancing supply and demand on the electric system.”

The staff comment concurs with a comment by the National Energy Marketers Association (NEM) that consumer education programs authorized by the DC PSC should be competitively neutral.   “Thus,” the comment says, “we urge the DC PSC to guard against authorizing consumer education programs that focus exclusively on the virtues of Pepco’s own dynamic pricing offers and that may provide consumers with incomplete or misleading information about offers from competing marketers.”

The comment also concurs with NEM’s view that marketers should have sufficient access to the data from smart meters to operate their alternative dynamic pricing offers.  “Relative to Pepco, marketers should not be competitively handicapped by discriminatory access to the smart meter data . . . ,” the comment states.  The comment also recommends that the DC PSC ensure that appropriate safeguards are in place with respect to the personal information that smart meters generate about customers and ensure that entities that receive such personal information protect it appropriately.  In addition, the comment suggests that the DC PSC require Pepco to inform its customers that it is using their data for purposes of dynamic pricing.

The Commission vote approving the comment was 4-0.  (FTC File No. V140001; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702).