Electricity costs should move to reflect demand: Chu

WASHINGTON (Reuters) - As the United States' power grid becomes more sophisticated, electricity rates will need to rise to reflect periods of intense energy use and to encourage consumers to change their electricity habits, U.S. Energy Secretary Steven Chu said on Monday.

Chu said currently most local electricity rate commissions view themselves as consumer advocates and try to keep electricity prices as low as possible.

"Hopefully that will evolve somewhat, so that they begin to fold in some of the real costs of electricity generation and electricity use," Chu said at conference focused on creating a "smart grid."

For instance, on hot summer days when air conditioning use is high, utilities would charge customers more for electricity. Chu said those who set rates should be more lenient with electricity generated from cleaner sources such as wind or nuclear power.

Chu also pointed out that during periods of low energy consumption, electricity prices would be cheaper for consumers.

Lawmakers and regulators have been pushing proposals to expand and modernize the nation's electricity grid to cope with expanded renewable energy generation and increased electricity demand.

The economic stimulus package passed by Congress earlier this year authorized the Energy Department to offer more than $4 billion in grants for projects to update and increase the efficiency of the grid.

But Chu cautioned that adjusting prices alone will not modify the way consumers use energy.

"Price signals do matter, but you can't just simply use a price signal," Chu said. "You really have to make it very easy to save energy."

Consumers need to have a very simple system that will provide them with specific information about their energy use and they should be able to adjust their appliances so that they run mostly during non-peak energy hours, Chu argued.

The department announced Monday the availability of $100 million in funding from the stimulus package for work force training for developing so called "smart grids." A smart grid utilizes computers and sensors at power plants to move electricity more efficiently and at lower costs.

In addition, the department offered more than $44 million for state public utility commissions to hire new staff and retrain existing employees to ensure proposed electricity projects can be quickly reviewed and approved.

(Editing by Christian Wiessner)