Smart Meters and Smart Power Use

As smart meters penetrate an ever-growing portion of U.S. households, utilities and economists are still unsure of how best to use the technology to encourage people to adapt their power use.

It is a generally agreed upon objective that fixed-price electricity should be replaced by pricing systems that encourage customers to reduce their usage during peak hours. A 2009 federal study estimated that smart meters could reduce peak electricity usage by 20 percent. Greenhouse emissions would be reduced substantially, too, since plants called on during peak demand are often the dirtiest and least efficient.

What utilities and regulators are uncertain about is the extent to which customers should be exposed to extreme price fluctuations. Some utilities offer discounted daily plans that include a limited number of days on which they can charge up to five times the normal rate during peak periods; others simply tier prices by the time of day. Some are wary of penalizing customers with high peak rates and are instead considering rewarding efficiency with cash rebates.

The fact is, while some households are able to adjust schedules and activities in order to avoid peak pricing, others may not have the luxury. Consumer advocates worry that people on fixed incomes may suffer if they try to avoid peak prices; for example, by not turning on the air conditioner on extremely hot days.

Further, not all households will have the time or inclination to heed price signals in the first place.

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