Ignorance is bliss when it comes to our electricty and natural gas bills. However, the party turns sour when we look at our bill. The problem in a nutshell: you don't know the cost when you are actually consuming it!

Why not knowing the real cost causes problems
1) Most of us have no idea of what the price of electricity and natural gas is at the time we actually consume it. If you do, you are in small lucky minority who either have an Advanced Meter and/or are enrolled in a Demand Response Program.

Electric generation varies by the season, the day of the week and time of day. So does the price. For example, prices generally fall during the fall and winter and then peak in August. However, since most of us have no information on hourly prices, we're not able to make decisions on when to conserve or consume electricity.

Most of us don't really care what the price is when we consume energy. That's because 93 percent of us are on the Standard or Traditional Flat Rate and not a Time Varying Rate schedule. So we over-consume electricity during the critical periods (Summer or Winter depending where you live). As a result, your utility has to call upon the most expensive peaking power plants to meet your requirements. When the bill comes then we get all excited and call our Congressman.

2) Believe it or not. Some electric power plants are built and stand idle for nearly 360 days of the year. They're called peaking plants and only run in the summer or winter when the electrical demand exceeds the normal supply of electricity. Sometimes they only operate for a couple of hours. These plants are very expensive to run and drive up everyone's electricity bills.

3) Big Businesses businesses take advantage of demand response and advanced metering programs and get paid for it. WalMart, Best Buy, 7-11, Home Depot, Lowes Home Improvement Stores, and Big Lots Stores have been doing this for years. These companies earn money by agreeing not to consume electricity or natural gas when there's a shortage. They also get to choose their electricity and natural gas suppliers. Most of us don't have that option.

4) Many State Public Utility Commissions don't think you and I can make decisions on whether or not to consume electricity or natural gas at certain times. They want to protect us from the price volatility of the wholesale electricity and natural gas markets. As a result, not many States have approved demand response and/or advanced metering programs. This sought of reminds me of the fomer Soviet Union. "They" know what's best for us.

Demand Response and Advanced Metering programs combined with Time Varying Rates would give retail customers the ability to reduce the high demand, eliminate these expensive peaking plants, and lower our average electricity bills. The same could be said for natural gas bills.

Will people have to change their lifestyles with Demand Response and Advanced Metering programs?

Studies have shown that some residential electricity consumers take steps to reduce their consumption. However, they don't have to take drastic action to produce benefits.

In one study, residential consumers were told that actual electricity price was five times higher than what they were accustomed to seeing. On average, 13 percent of the group dropped their electricity use by 13 percent.

Residential consumers that have advanced metering, which provided better price information, on average dropped their electricity consumption by 26 percent. No drastic changes to lifestyle were involved either. They simply raised their thermostat settings by a couple of degrees.

The Electricity Calculator
Now that you have some idea of what role demand response and advanced metering affects electricity prices, try using the Electricity Calculator.* The calculator will be used to decide future electricity prices and environmental consequences in the United Kingdom.**

What you will find out is that electricity prices and environmental quality are strongly related. You'll see what we mean when you play around with the calendar.

* Unfortunately, we could not find an electricity calculator for the United States. Nevertheless, we think using the Electricity Calculator that we found on BBC Online to meet the United Kingdom's electricity needs in the year 2020 is excellent.

You can practice being an Energy Czar using the Electricity Calculator for the United Kingdom that we found on BBC Online. We think its pretty cool. Click the box below and then click start.

** About the Electricity Calculator. If you didn't do so well, then you'll want to look at the other energy articles below.