Baby, It’s Cold Outside: 2014 Polar Vortex Impacts on Residential Dynamic Electricity Pricing Programs

During the winter of 2014, the Polar Vortex created extreme and sustained cold weather that greatly affected the electricity markets in the Midwest. For residential participants in market-based pricing programs, the extreme winter weather drove electricity prices to a record high of almost $2 per kilowatt hour. These participants are typically accustomed to shifting electricity away from peak hours during summer months, but what happens when winter prices spike at unpredictable times and remain high throughout the cooler months? How does this affect participant behavior and retention, and what can administrators do to protect participants from high winter prices going forward?

This paper takes a deep dive into the impacts of the 2014 Polar Vortex by analyzing household type, hourly interval usage and billing data, and high price alert settings to determine what types of residential customers are able to reduce or shift load during high winter prices and what impacts this could have on the need for system voltage reduction. This paper highlights specific participant behaviors, including response to high prices over a long duration of time and at different times of the day. This paper also looks at seasonal and weather-related factors such as how price elasticity in the winter months compares with summer months, and whether there is any overall conservation effect from sustained high winter prices.

As extreme weather events occur with greater frequency, it is imperative to continuously evaluate and innovate to deliver the best program offering to participants. The 2014 Polar Vortex greatly affected participant enrollment discussions and ongoing education on the variability of market-based pricing, as well as the development of tools to support participants going forward. As such, this paper will also focus on the administrative changes made to accommodate future extreme weather events and dynamic pricing administration in the age of increasing climate volatility.