October 6, 1998

Mr. Jack Greenhalgh
Vice President, Energy Consultants, Inc.
1439 Great Neck Road Suite 202L
Virginia Beach, VA 23454
(757) 481-2500 voice
(757) 481-1126 fax

Testimony of Mr. Jack Greenhalgh, Vice President, Energy Consultants, Inc. to the Joint Subcommittee Studying Electric Utility Restructuring
October 3, 1998

I am Jack Greenhalgh, Vice President of Energy Consultants, Inc. which is a Virginia small business, headquartered in Virginia Beach.

Thank you for giving me this opportunity to present information to you on a very effective residential and small business demand side management program. This program provides significant cost savings benefits to its users and to the environment of the Commonwealth.

Energy Consultants, Inc. provides demand control equipment to approximately 2,300 residential and 35 small business and church clients. We market our demand control equipment throughout Virginia and North Carolina. Other demand control equipment suppliers serve thousands of other clients.

I estimate there are over 7,000 users who have made a significant investment in this equipment in order to manage their demand for electricity. Their primary reason for making this investment is to take advantage of the various electricity rates that provide lower electricity bills. The resulting reduction in demand benefits the environment by deferring the need to build new power plants. I hope this very beneficial program will not become a casualty in any electric utility restructuring.

I am submitting these comments to represent the users of this equipment as well as the selling dealers and the manufacturers. Virginia users are from throughout areas serviced by Virginia Power, from Northern Virginia to Richmond to Charlottesville to Hampton Roads, and many cities in between. However, this technology could benefit electricity users all over the state if their respective power company made the appropriate electricity billing rate available to them.

The residential customers of this technology are primarily business owners, senior executives and professionals. The best applications for the technology are for the larger homes with high electricity usage. These customers also tend to be well-informed and socially conscious, leading them to recognize when new technology has given them a new tool to save money while helping the environment.

In order to understand the issues here, I must correct a common misconception about how households or small businesses go about saving money on their electricity bill. Most people believe that the only way to reduce their electricity bill is to use less electricity. They think that they must reduce their use of electrical equipment by turning their thermostat down in the winter or up in the summer or changing the hours they use their equipment to specified off-peak times. Saving electricity by these methods may cause the user to experience discomfort, inconvenience and life style change. Households generally reject these methods, and they are impractical for most businesses.

On average, people simply will not endure, or usually even consider enduring, very much discomfort or inconvenience to save money on electric power. In fact, skepticism about the ability to save money on electric power without discomfort or inconvenience has been the most difficult obstacle to introducing this technology.

Computer technology now provides many consumers a new way to deal with their demand for electric power. The dramatic reduction in computer cost allows production of a demand controller which is affordable to home owners and small businesses.

Today's demand controller is a dedicated computer driven device that lets a user significantly reduce his demand on the power company while experiencing no discomfort or inconvenience. Energy Consultants installs a small demand controller that manages the electrical loads for heating and cooling, the hot water heater and the electric clothes dryer. For the typical homeowner, these uses represent over 80% of their electrical usage.

The demand controller smooths out the demand pattern placed on the power company. In many cases, there will be some reduction in the kilowatthours consumed but the real savings for the user, and the energy efficiency for the power company, comes from the reduction in peak demand. The homeowner has direct control of this equipment and can set it so he very rarely is aware that it is operating.

A more detailed explanation of how the equipment works is contained in the attached exhibit. Briefly, the demand controller works with a little known electricity billing rate option called Schedule 1S. This option separates the charge for electricity use into two parts. One charge is for the kilowatthours consumed and another is for the peak demand placed on the power company during the month.

The Schedule 1S rate option has been available for residential customers since 1978. Large commercial facilities are all billed this way and demand control is a fairly routine part of their operations. Similar billing rate options are available in parts of North Carolina, South Carolina, Arizona, North Dakota, South Dakota, Ohio and Colorado.

Large companies, such as Honeywell and Johnson Controls, provide very sophisticated equipment for large users. Affordable equipment for the residential and small business user has come from smaller manufacturers and dealers, such as Energy Consultants, Inc.

We have collected and analyzed over 18,000 monthly electricity bills from our residential clients. They are reducing their demand peak on the power company by 50% or more. In addition, they are reducing their electricity bill by 30% in the summer and 20% in the winter. They are saving annually approximately $600 by paying a lower price for the electricity they use. And they are doing this without inconvenience, discomfort or life style change.

We also have similar installations in a number of small businesses and churches. The equipment being controlled and the operational aspects are somewhat different, but the concept is the same. The business is smoothing demand patterns and reducing overall kilowatthour consumption -- all without disruption to their operations or discomfort to their customers. These churches and businesses are saving up to $20,000 a year.

If the demand controller users are benefiting so well, why are so few customers using this technology? They simply do not know about it! Every potential user we talk to says they never knew the alternative rate options existed or that affordable demand control equipment was available. Other than publishing a small brochure on the subject, which gets very little distribution, I am not aware of any effort by Virginia Power to promote this program.

I can only surmise that Virginia Power has sufficient generation capacity to handle their electricity demand for the foreseeable future. From their perspective then, it simply would not be good business to reward people for managing their demand. Perhaps in a competitive marketplace, no electric utility would be motivated to help reduce the avoidable growth in electricity use. But from an environmental perspective, the Commonwealth does have an interest in the long term avoidance of increased consumption of electricity and more power plant construction.

With effective promotion, it is not unrealistic to foresee between 100,000 and 200,000 residential and business users of demand control in ten years. This would reduce the need for new generating capacity and benefit our environment.

In addition to the cost savings and environmental concerns, I would hope that any electric utility restructuring will treat residential and small business users equitably relative to the larger commercial / industrial users. Specifically, small users should have the right to gain economic power by allowing third parties to organize such users. Demand control users then could be represented by a third party to negotiate an appropriate demand based billing rate.

Energy Consultants, Inc. provides a modern, very useful technology that benefits the customer and the environment. I hope this Subcommittee will consider in its deliberations and any resulting legislation the proven value of demand management of electric consumption by smaller users.

On behalf of the users and the suppliers of this technology, thank you for your concern and your attention.

Explanation of Residential Demand Control with the Energy Sentry Demand Controller

Demand control with the Energy Sentry is based on an alternative electricity rate, either Schedule 1S or Schedule 1P. Schedule 1P was introduced in 1978. It is now a grandfathered rate that is limited to homeowners who were on that rate when Schedule 1S was introduced as its replacement in 1986. This explanation will use the Schedule 1S rate for illustration purposes. The recent dramatic growth in the acceptance of this rate is shown the Figure 1.

Figure 1. Estimated growth in numbers of Virginia Power customers using Schedule 1S

Schedule 1S was not accepted by many people until the introduction of demand control technology, after which there has been steady and significant growth. We believe that between 6,000 and 7,000 homeowners are now using this technology. As more people try it and tell their friends and neighbors, it's use is spreading rapidly.

The original concept of Schedule 1P, now Schedule 1S, was that homeowners would exercise discipline over the use of their electricity by rescheduling things to off-peak time and even setting heating and air conditioning thermostats to reduce usage during on-peak time. For a homeowner to save appreciable money by using the rate, it required a combination of life style change, discomfort and inconvenience. Consequently, the rate was poorly accepted as people have shown very little willingness to accept any of these disadvantages to save money on their electricity bill.

Advances in computer technology now provide affordable, dedicated microprocessor equipment that eliminates these disadvantages. Businesses, such as Energy Consultants, have been introducing the new technology to homeowners and small businesses in Virginia since 1991. With their very limited budgets for advertising, those suppliers have limited ability to reach the public. In spite of this limitation, the resulting growth in the number of users of this rate has been significant.

The following is a sample comparison of Schedule 1, the billing rate for most households, to Schedule 1S, which is used with demand control equipment:

                       Schedule 1     Schedule 1S
Customer Charge         $7.00          $12.00
First 800 kWh            7.803¢
Winter over 800 kWh      5.832¢
Summer over 800 kWh      8.878¢
On-peak time                             5.039¢
Off-peak time                            2.975¢
Winter Demand Charge                    $4.974
Summer Demand Charge                    $6.833
On-peak Time:
     Winter - weekdays, 7:00 a.m. to 11:00 a.m. and 5:00 p.m. to 9:00 p.m.
     Summer -weekdays, 11:00 a.m. to 10 p.m.
     Some holidays are also off-peak

On Schedule 1S, the user pays a different rate during the day, depending on whether it is during a specified peak time period or not. The user also pays a demand charge based upon the highest simultaneous use of electricity during the month -- something like a high water mark.
It was originally expected that savings would come from disciplined use of electricity, specifically the shifting of usage to off-peak time, resulting in a lower price per kWh. This would result in a usage reduction during on-peak time. Homeowners generally rejected this rate because achieving savings in that way required discomfort, inconvenience and life style change.

Demand control technology gave the homeowner and small business the capability to have sophisticated minute to minute management of the major electrical loads. Many of these loads operated simultaneously by sheer random chance, not because they needed to. Using computer technology to manage this process, it is possible to find the exact level at which everything can run as much as it needs to for the homeowner's comfort and convenience but avoids the peaks cause by unnecessary concurrent operation.

In order to understand how demand control works in the home, it is important to understand how energy is used in a home. As shown in Figure 2, our air conditioning, heat, hot water and clothes dryer account for 82% of our total residential electric demand. The All Other category includes our stove, refrigerator, lights, TV, VCR, fans and everything plugged into a wall. A characteristic of these "All Other" loads is that you generally KNOW when they are on. If your TV is on, you know it.

But the heating, air conditioning, hot water and dryer heating element are different. We generally are not aware when this equipment on. It operates in the background. As long as the room temperature is where you set it on the thermostat, you don't pay any attention to when the air conditioner is actually operating. Even the clothes dryer heating elements cycle on and cycle off, just like the heating elements that come on and off in the oven to maintain the temperature set for cooking. Even though you may know when the dryer is tumbling, you really don't know when the heating elements are on.

Recognizing how these equipments operate in the background, we can see how it is possible to manage their operation without affecting the comfort or convenience of the homeowner. The goal of demand control is to manage only these loads, minimizing the unnecessary coincidental operation and maximizing the demand reduction, all without the homeowner being aware that anything is happening. The ability of the demand controller to manage minutes at a time is the key to its operation.

Figure 3 looks at a one hour block of time in a typical home. In this home, there are two heat pumps, a hot water heater and an electric clothes dryer. The BASE LOAD at the bottom of each diagram represents the All Other loads.

The left diagram in Figure 3 shows activity without the Energy Sentry, which is the computerized demand controller. One air conditioner comes on because the room temperature calls for it, at about the same time, a second air conditioner happens to come on. Coincidentally, the hot water heater starts heating water in the tank. Virginia Power is measuring the highest half hour average of this demand for the month. The dotted line here is the highest half hour average, about 13 kilowatts. The demand charge in Schedule 1S is based on this peak. If this reading of 13 kilowatts was the highest during the month, then 13 KW x $6.833 would be a $89 demand charge on top of everything paid per kilowatthour.

The Energy Sentry acts like an electronic traffic manager, or a throttle, that the homeowner controls. In the right diagram in Figure 3, the homeowner has set the demand limit in the Energy Sentry to manage his demand to 6.5 kilowatts. The Energy Sentry caused the second air conditioner to come on slightly later, not enough to notice it in the home. It caused the hot water heater to wait five or ten minutes until the air conditioner cycled off. The 13 KW uncontrolled peak demand is now only 6.5 KW. That's a reduction of 6.5 KW.

The Energy Sentry operates under the homeowner's control. Demand limits for each month of the year are preprogrammed in the equipment. Demand Limits can be low in the spring and fall. They need to be higher in the summer for gas heated homes and higher in both winter and summer for electrically heated homes.

During the month, the demand limit can be adjusted whenever needed by the simple turn of a knob. If the homeowner recognizes that the controlled equipment is being cycled, the demand limit is set too low. This can happen if the weather is more extreme than anticipated by the demand limits preprogrammed into the Energy Sentry. This can be corrected by simply turning the demand limit up 1 to 2 kilowatts, which still is dramatically lower than the home would use without the Energy Sentry. It is routinely possible to reduce the demand peak by 50% without any awareness by the homeowner. The Energy Sentry operates entirely in the background.

Figure 4 shows the impact on the homeowner's electricity bill of adopting this technology. The assumption is a home using 2900 kilowatthours in July. Under Schedule 1, this would cost $263. But under Schedule 1S, it would only cost $165. The management of the demand limit to 6.5 reduces the electric bill by almost $100.

The lower bill did not result in discomfort or inconvenience. The customer did not overtly defer loads to off-peak, except the clothes dryer, and made no changes to the thermostat settings. If the homeowner finds the off-peak times to be inconvenient for clothes dryer operation, the Energy Sentry's demand limits simply need to be set a little higher.

The Energy Sentry only manages during on-peak time; that's about 27% of the time. It is not operating during off-peak time, which is the other 73% of the time. Virginia Power does not measure your demand peak during off-peak time so the Energy Sentry doesn't need to manage demand then. The on-peak and off-peak times are displayed in Figure 5.

When a thousand households are reducing their demand peak by 6 kilowatts or more without even knowing it's happening, that's a reduction of 6 megawatts to Virginia Power. It only takes about 15,000 homes to completely eliminate the need for a 100 megawatt power plant. It is entirely feasible to expect 100,000 to 200,000 residential and small business users within ten years, if demand control of electricity could be effectively promoted as a public policy.

Energy Consultants, Inc.