Sep. 23--State regulators on Tuesday approved a Portland General Electric Co. pilot program to charge variable electricity rates, which the utility hopes will motivate residential customers to shift or reduce their consumption during periods of unusually high demand.

The goal is to see how much the utility can reliably shave customer's consumption by sending real time price signals and, in some cases, controlling energy use within customers' homes.

The Northwest still has relatively low electricity rates, and the present system of flat rate pricing means customers have no sensitivity to wholesale market prices or motivation to alter their consumption.

Peak pricing is one of a number of measures known in the utility industry as demand response. Others include energy efficiency programs as well as smart grid and smart appliance technologies, which sense pressure on the power grid and can adjust energy consumption accordingly.

Demand response is getting increasing attention in the Northwest as growing demand and environmental constraints reduce the region's traditional surplus of hydropower, and greenhouse emission limits and rising fossil fuel prices make conventional power plants more expensive.

Most utilities meet a portion of their power needs with spot market purchases, where pricing is unpredictable. PGE is particularly exposed because it has built few generating resources since shutting down its troubled Trojan nuclear plant in 1993.

PGE customers, for example, use an average of about 2,500 megawatts of electricity, but the company has power plants and long-term contracts to cover only 80 percent of that demand. Moreover, on extremely hot or cold days -- typically for about 80 hours a year -- power consumption can jump to over 4,000 megawatts, and spot market prices can increase precipitously.

Demand response is one way to manage that risk.

"Rather than build a power plant that's going to be used so infrequently, it makes sense to look at the demand side and enlist customers to address the problem," said Joe Barra, director of customer energy resources at PGE.

PGE's program is still embryonic. The company intends to collect baseline data for the next year, then launch a pilot program with 2,000 customers. Up to 800 of those households eventually will get programmable thermostats that allow them to set default preferences for economy versus comfort.

PGE will remotely control their heating and air conditioning systems within those preferences during peak events.