Submitted by Fred Armendariz, CEO, Procure America
In 2015, the California Public Utility Commission (CPUC) approved a dramatic change to the Time-of-Use (TOU) rate structures for all of the California’s investor-owned utilities (primarily SDG&E, SCE and PG&E). This conversion has been revolutionary as some of the historically “least expensive” times of the day to use power in many cases have now become the “most expensive” time for energy consumption, essentially turning things upside down.
By way of background, there are several factors contributing to this extraordinary makeover—the most dominant being the increased solar power coming into the grid during the day relieving the strain on the grid during sunlight hours. Conversely, there has been a shift in power consumption to the early evening and as such the reversal in cost structures.
Fast forward to early 2020 when PG&E floated the concept of delaying their TOU migration from the previously established date of November 2020 to March of 2021. “But wait a minute!” says Procure America CEO Fred Armendariz. “Many of our public sector clients had made significant investments in technology and initiated changes to operations in anticipation of the November time frame. It simply didn’t seem fair that the delay would end up costing those who were proactive and forward thinking because of PG&E’s internal conversion needs.” Seems that PG&E agreed, and they found a solution that ended up benefited all commercial consumers in PG&E service territory. Sometimes standing up and asking questions can bring about positive change!
The remedy was simple in a way, but revolutionary from a protocol perspective. What PG&E agreed to offer through Advice Letter 5785-E, dated March 20, 2000, was to allow any commercial customer to use either rate for as little as one billing cycle (on an account-by-account basis) and then revert back to the alternative rate without waiting the customary 12-month period; essentially being able to straddle both rates for 11 months. This had never happened in the 40-plus years that TOU rates had been public policy and created a huge opportunity for those who understood how to model usage and rates in real-time (like Procure America). Further, this “accommodation” would only be available until March of 2021 when the rates would all mandatorily transition to the new structure as mandated by the CPUC.
So the race was on and Procure America along with several partners (CSAC, League of Cities, ACWA, Avenu Insights and Analytics, Capitol Advisors and others) did their best to engage quickly with counties, cities, water and school districts, public universities. The mission was to help them navigate this one-time opportunity to lower cost by essentially “cherry picking” rates depending on usage profile. Simultaneously, the Procure America Utility Tariff Rate Optimization team developed customized software to help with the calculations and modeling; which meters would benefit, when to make the rate changes (to the day), savings calculations…and off they went.
Now, mind you, around March of 2020 the COVID pandemic was taking full hold of government and our society in an overwhelming way. The country was in a panic and everyone understood that getting people’s attention to review utility rates was going to be a challenge. But an amazing thing happened: elected officials, policy makers and government staff at every level listened, took note, and engaged.
“It was amazing,” says Mr. Armendariz. “We had conference calls with sometimes 50 agencies at once, with many requesting Tariff Rate Optimization Studies (TROS) on the spot! Further, thanks to the County of Orange, there exist a Regional Cooperative Agreement for this specific review services that helped. But what was incredible was how quickly government can react when they see public benefit available. I was proud to be part of this and felt like we were literally helping keep the lights on during a challenging time.”
Fast forward to June of 2021 (following the end of the TOU project on April 1, 2021), and millions upon millions of taxpayer dollars were saved across PG&E service territory—all without a single change to operations or one dollar of investment in technology or resources.
“When Procure America TOU review services were first brought to my attention, I wanted to explore the program with a ‘you never know” perspective,’ said Michael Frost, Deputy Director of Public Works for Marin County. “Well, I am glad I did. The Procure America team was able to identify material savings for us.”
Whoever says government is slow to react didn’t work with the people on this on this project!
Procure America is the nation’s leading business intelligence firm supporting local government. One of Procure America’s core service offerings provided to cities and counties is Utility Tariff Rate Optimization Studies.