Markets Wired

The Federal Trade Commission staff submitted a comment in response to a request from the Commonwealth of Massachusetts Department of Public Utilities (Mass. DPU) for comments on its investigation of dynamic pricing for residential electricity customers. Dynamic prices are rates that vary over time, based on wholesale electricity prices and transmission congestion conditions.

According to the FTC staff comment, with dynamic pricing, customers who respond to incentives to trim demand for power during peak demand periods can save money, lessen environmental impacts, and reduce the costs and improve the reliability of the electric system. Such actions benefit all customers, even those who do not respond to the incentives.

The staff comment identifies fundamental difficulties in reconciling the “basic” rate-regulated service in Massachusetts with rapid innovations in services and equipment – such as “smart” appliances and electric cars – which enable customers to respond to incentives to reduce electricity consumption during peak demand. To reach this goal, the comment recommends that the Mass. DPU adopt a peak-time rebate plan similar to that adopted by Baltimore Gas & Electric once appropriate electric meters – and consumer education and consumer protection programs – are in place.

The staff comment urges the Mass. DPU “to guard against authorizing public consumer education programs that focus exclusively on the virtues of any distribution utility’s time-varying rates and may provide consumers with incomplete or misleading information about offers from competing marketers.” It also urges the Mass. DPU to “ensure that proper safeguards are in place with respect to the personal information that smart meters generate about customers and make available to marketers,” and that “distribution utilities inform their basic service customers that they are using their data for purposes of implementing time-varying rates.”

The Commission vote approving the comment was 4-0. (FTC File No. V140003; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702).