Starting in December, Traverse City Light & Power (TCLP) customers will all be transitioned to a new rate structure. Called time-of-use (TOU), the dynamic pricing model is similar to surge pricing for ride-share companies – charging a higher rate when electricity is most in demand and expensive to produce and a lower rate when costs and demand are lower. The Ticker looks at what the transition will mean for customers, with TCLP also set to host two open houses on the new rates Thursday from 12pm-1pm and 5:30-6:30pm at the Hastings Street service center.

The city-owned utility has been preparing for several years to transition to TOU rates – a model increasingly used in the industry to manage electricity demand and reflect the actual costs of producing power. Under the new program, TCLP will set “on-peak hours” and “off-peak hours.” Though the actual hours will vary from summer to winter, on-peak hours – the highest rates – generally occur during the weekday, while off-peak hours include late evenings/early mornings, weekends, and holidays.  Customers will be encouraged to plan intensive energy uses – like running dishwashers or laundry machines, cranking the heat/AC, or charging electric vehicles – for off-peak hours.

“Time-of-use encourages customers to shift energy use to times when electricity is cheaper and cleaner,” explains TCLP CFO Karla Myers-Beman. “It also makes the grid cleaner. If demand is high, the last generators coming online are using fossil fuels. Shifting usage supports renewable energy and reduces strain on the grid.”

Shifting usage – or getting customers to change their habits and more proactively plan out energy consumption – typically requires financial incentives to work. TCLP will offer two TOU programs, depending on how willing customers are to adjust their usage. Starting in December, customers will automatically be enrolled in the “Eco Steady” program – described as a more “moderate” approach to on-peak pricing – but can call TCLP to switch to the more aggressive “Eco Champion” program. The latter offers shorter on-peak hours during the summer but higher rates, rewarding customers willing to shift usage to off-peak times.

Myers-Beman says the utility has “different sets of customers,” some of whom “may want to jump in and have more of an impact on the climate” by being Eco Champions while others may want to gradually adjust under Eco Steady. As part of the transition, TCLP customers will automatically be “phased in” over four years to the long-term TOU rates. Under that baseline Eco Steady program, customers will pay $13.50 per month plus kilowatt-hour rates ranging from 9-10 cents in off-peak hours to over 13 cents during summer on-peak hours.

Customers, however, can call TCLP to skip the phase-in period and go right to the full TOU rates. Those rates illustrate the more significant contrast between on-peak and off-peak hours that all customers will eventually experience; rates more than double in the summer from off-peak to on-peak times. The goal is to reduce grid demand during on-peak hours, according to TCLP’s website, as “any reduction in this peak will lower the utility’s cost for capacity and provide savings for both the utility and its customers.”

Myers-Beman says the transition to TOU is “designed to be revenue neutral” for both TCLP and customers. Off-peak prices are lower than current prices, while on-peak prices are higher, according to the utility (the current system averages costs over the year to produce a single flat rate). Myers-Beman says customers will likely see higher bills during the summertime, intended to be offset with lower wintertime bills. Customers could even lower their bills under the new system by concentrating usage during off-peak times, she says.

TCLP’s website emphasizes the behavioral shift that will require, however. “For those who naturally consume more energy during off-peak hours, you won’t need to alter your behavior to have the potential to save,” it states. “For others, you will need to make deliberate choices to shift your electricity-consuming activities to off-peak hours.” TCLP says TOU rates are more equitable than the current system, creating “fairness by recovering the costs of providing electric service equitably. Those customers who cost more to serve pay more, and those customers who cost less to serve pay less.”

TCLP plans to offer resources to help customers with the shift. In addition to Thursday’s open houses, TCLP provides an “energy coaching program that can help with looking at energy efficiency optimization and reducing those bills,” Myers-Beman says. The utility offers tips for maximizing energy savings, including upgrading to LED bulbs and using more natural light, buying smart plugs/strips, using a smart thermostat to regulate house temperatures during on-peak hours, saving laundry for weekends, and charging EVs overnight. TCLP offers the ability to check energy usage online and make real-time adjustments, Myers-Beman notes.

Moving to TOU rates has become a “cornerstone for utilities,” according to Myers-Beman. She adds: “We're not the first, but we're happy we're moving forward to make these impacts for our customers – to make it more affordable for them, give them more control over their behavior, and also have an impact on the grid and making it cleaner.”