NCPA - National Center for Policy Analysis


August 15, 2007

Tucked in the massive energy bill passed by the U.S. House of Representatives is funding for smart grid technology, which lets your "smart" electric meter talk back to the utility and record your usage by hour, so you can adjust your habits to take advantage of lower, off-peak rates, says


  • As of now, most residential and commercial customers still pay their electric utility a flat rate multiplied by the kilowatt hours they use.
  • But with a smart grid in place, a utility could restructure rates and then offer all its customers products that allow either the customer or the utility to control usage based on demand and hourly rates.
  • For example, a smart thermostat allows a customer to program it so when the electric rate hits a certain price on a summer day, the target temperature in his house becomes two degrees warmer and the air conditioner doesn't run as much.

Results so far have been promising:

  • In a California test that ran from 2003 through 2005, the average customer reduced his usage by 13 percent during the hottest summer hours when rates were five times higher.
  • Customers with smart thermostats reduced their usage by 27 percent.
  • Customers with gateway systems, which adjust the electricity use of multiple appliances, reduced their usage by 43 percent during peak hours.

"In almost every region we're soon to be below the safe margin (for reserve energy) for high energy use days," says Sterling Burnett, a senior fellow with the National Center for Policy Analysis. "This is a quick way of reducing demand." 

Source: Ashlea Ebeling, "What Would You Pay To Stay Cool?", August 15, 2007.

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