Q&A: Time-of-Use Rate Plan Transitions Begin in 2018

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Southern California Edison is preparing to transition 400,000 residential customer accounts to Time-of-Use rate plans next March as part of a statewide initiative.

Beginning in December, SCE will notify customers in this first wave of transitions that they’ve been randomly selected to participate. These customers will receive multiple communications before the actual transition in March. They will have the option to either remain on their current rate, transition to a specified TOU rate or switch to a different TOU rate offering.

Jessica Lim, principal manager of Marketing at SCE, answers questions about what this means for SCE’s customers participating in the first wave of transitions — and for those who are not.

Q. Why is this transition to TOU rate plans happening?

J. Lim: There are certain times of the day when providing power is both less expensive and better for the environment because of the greater availability of cheaper and cleaner renewable energy sources. TOU rates allow utilities like SCE to pass these cost savings along to customers. They also promote energy conservation and ensure power is available when customers need it the most.

This transition is part of a statewide initiative; all of California’s investor-owned utilities are planning to transition their eligible customers to TOU rate plans in phases between 2018 and 2020.

Q. How does a TOU rate plan work?

J. Lim: TOU rate plans offer different pricing based on time of day, weekday or weekend, and season. Customer bills are determined by when they use electricity and how much they use. For example:

• The times of day with the greatest demand on the electric grid are called On-Peak periods. Rates will be higher during these times.
• The times where there is less demand on the grid, or an abundance of clean renewable sources, are called Mid-Peak, Off-Peak or Super Off-Peak periods. Rates will be lower during these times.

If customers can shift some of their electricity usage to take advantage of the lower Off-Peak and Super Off-Peak rates, they’ll have the ability to lower their overall electricity costs.

These TOU rates do not change the overall amount of money SCE collects from residential customer bills, but individual customers may see higher or lower bills, especially during different times of the year.

Q. Why does the state of California want customers to switch to TOU rate plans?

J. Lim: The simplest answer is the On-Peak time periods are the periods of greatest strain on the power grid. The idea behind TOU rates is to incentivize customers to switch some or most of their electricity use, if possible, to Off-Peak or Super Off-Peak periods by offering lower rates during those times of day, so SCE can pass on lower costs from cheaper and cleaner sources of generation.

California is the No. 1 state in the nation by far in generating solar energy and that’s great news for our environment. However, the grid comes under strain at the times of day when the availability of solar energy declines as the sun sets. When that happens, grid operators need to compensate for the decline by quickly ramping up other energy sources, which typically produce more pollution than renewable energy sources.

Q. What are the TOU rates that customers will be transitioned to?

J. Lim: Participants will be transitioned to one of two TOU rate plan options. In one, the On-Peak period is 4-9 p.m. on weekdays. In the other, the On-Peak period is 5-8 p.m. on weekdays, which is slightly more costly during the shorter peak time. There are no On-Peak periods on weekends, only Mid-Peak, Off-Peak and Super Off-Peak periods (Click here to see the pricing for each TOU rate plan).

Q. Which customers will participate in this pilot?

J. Lim: SCE will randomly select 400,000 residential account holders from across our service area. Overall, SCE serves 4.3 million residential accounts, so 400,000 equals just under 10 percent of its customer base.

These customers will begin receiving notification letters in December — 90 days ahead of the March transition — and they’ll continue receiving communications every 30 days leading up to the transition date.

Certain customers will be excluded from the initial transition, such as:

• Customers enrolled in the Medical Baseline program;
• Customers enrolled in the third-party notification program;
• Customers requiring an in-person visit before a disconnection;
• Residential customers already on a TOU rate (more than 50,000 as of October);
• Community Choice Aggregation customers; and,
• CARE (California Alternate Rates for Energy) and FERA (Family Electric Rate Assistance) customers located in state-defined hot climate zones.

However, any customer can switch to these or other available rate options, depending on which one best suits their lifestyle.

Q. Will all customers benefit from TOU rate plans?

J. Lim: TOU rates will be better for some customers than others. If a customer can shift some of their electricity use to take advantage of the lower-priced Off-Peak and Super Off-Peak time periods, they have the ability to lower their overall electricity costs.

The lowest-priced time periods typically occur weekday mornings and late evenings throughout the year, plus early afternoon during the winter. If a customer uses more electricity during other time periods, or isn’t able to shift at least some of their usage to these time periods, then the Standard Residential (“tiered”) rate plan, or a different TOU rate plan, might be more beneficial. SCE will provide custom bill analysis reports to help customers choose the rate plan that best suits their lifestyle.

Q. Is there a way I can determine whether I would benefit from a TOU rate plan?

J. Lim: SCE offers a Residential Rate Comparison tool on its website, SCE.com. If you’ve been a customer at your current residence since at least July 31, 2016, you can compare costs of your current rate plan with other available TOU rate options. Go to www.sce.com/rates and click on the Rate Comparison Tool link.

Once you use the tool, you can sign up for a TOU rate plan online. And beginning Jan. 1, SCE will add two more TOU rate plan options, so customers will have a total of five to choose from.

Q. What if I’m selected to participate in the pilot, but don’t want the TOU rate I’m assigned?

J. Lim: Both before and after the TOU transition, you’ll always be in control of your energy rate. If you decide that you no longer want to be on your assigned TOU rate, you can elect to move back to your tiered rate plan or to a different TOU rate at any time with no penalty.

For customers transitioned to the 4-9 p.m. or 5-8 p.m. TOU plans, SCE will provide up to a full year of bill protection. This means SCE will calculate whether you would have paid less under your current rate plan, and if so, SCE will credit back the difference at the end of 12 months.

Q. Will bill protection be available for customers transitioned to a TOU rate plan at a later date?

J. Lim: Yes, customers transitioned at a later date by SCE to either the 4-9 p.m. or 5-8 p.m. TOU rate plans will also receive bill protection. Customers interested in opting-in to one of these rates early, beginning Jan. 1, will also receive bill protection.

Q. Would I need to keep my TOU rate for all 12 months in order to receive bill protection?

J. Lim: No. If you decide to switch off from a TOU rate plan before 12 months, you’ll still be eligible for bill protection for the period of time you were on the TOU rate. If you’re eligible for a credit, it will be applied to your bill within two billing cycles.

Q. When will the rest of SCE’s residential customers be transitioned to TOU rates?

J. Lim: The rest of SCE’s residential customers will transition in late 2020, according to the current schedule.

Q. Why doesn’t SCE transition its residential customers all at once, instead of in phases between 2018 and 2020?

J. Lim: This is a major effort that will ultimately impact millions of people, so this first wave allows SCE to test its processes with a smaller set of customer accounts and identify any customer preferences and potential improvement areas in our operations. This way, when SCE begins transitioning the remaining 3 million-plus residential accounts to TOU rate plans in 2020, SCE is operationally ready to make that larger transition go as smoothly as possible for customers

Q. SCE recently announced its “The Clean Power and Electrification Pathway” white paper. How do TOU rates fit into that strategy?

J. Lim: The development of TOU rates precedes SCE’s “The Clean Power and Electrification Pathway” by a few years. That said, SCE developed the pathway to demonstrate how California can achieve its ambitious climate and air quality goals — including the reduction of greenhouse gas emissions by 40 percent from 1990 levels by 2030, and by 80 percent by 2050. They also include reducing nitrogen oxides and other health-harming pollutants by 2032 in areas of the state with the highest levels of air pollution.

One pillar of the pathway is to de-carbonize the electric sector, and TOU rates support that effort by encouraging customers to use more electricity during times of day when clean, renewable energy is abundant — even overabundant — during midday hours, and to use less when electricity is more expensive, and likely from sources that are more carbon intensive, such as natural gas power plants.

To learn more, see "Five Myths and Facts About Time-of-Use Rates.”

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