"Under our current electricity system, most consumers are not given the option of saving money on their electricity bills by using electricity at off-peak times," said Senator Susan Collins. "According to GAO, however, they could save billions of dollars if they were given the ability to do so."
The GAO report concludes that our current system, in which competition sets wholesale prices but regulation sets retail prices, results in a fundamentally flawed electricity market. Electricity demand is not able to respond to changes in supply, and as a result neither price signals nor price savings are passed on to the consumer. According to GAO, because electricity cannot be stored, the present system requires the construction of power plants that may only be needed for a few hours out of the year.
Demand-response is a method of allowing consumers to save money by shifting part of their electricity consumption to times when electricity is cheaper. Since shortages of electricity during peak hours can also lead to brownouts, blackouts, and price spikes, any means of addressing peak electricity consumption could be of great benefit to consumers.
"Our current system is tilted toward more supply always being the answer, and not focused enough on the importance of demand," said Senator Collins. "According to studies highlighted in the report, however, demand response programs could avoid the need to build 250 peaking power plants and reduce our natural gas use by 680 billion cubic feet. This would save consumers as much as $15 billion per year on electricity rates, and would also reduce natural gas prices and improve air quality."
GAO indicates that demand-response may be one of the most promising methods for achieving electricity cost savings. In fact, consumers in some trial studies were able to save $600 annually on their electricity bills just by varying the time when they consumed the most electricity.
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