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Manager's Column

On-peak usage: The elephant hidden in your electric bill

BY PAUL FITTERER

Congratulations. Your pattern of electric usage is nearly identical to your neighbors … and their neighbors … and the vast majority of the members of Capital Electric Cooperative (CEC). Although it may feel good to have such similarity with others, it won’t when you realize that your electric rates are being driven upward because as CEC members, we are nearly all using our electricity at the same time.

You may ask, “So why would it matter when I use electricity? After all, CEC only bills me for how much I use; not when I use it.” In actuality for residential and small-commercial members, this is the elephant hidden in your electric bill and it’s all about “on-peak usage.”

To explain, let’s first take a look at how CEC is billed by our wholesale power provider. Roughly 40 percent of our monthly power cost is determined by the total amount of kilowatt hours (KWH) that our members use and the other 60 percent is based on the single-highest point during the month when our members collectively use the most KWH. This highest-collective point is called the “monthly system peak,” and it may occur on multiple days in a month and last for a few hours at a time. Electricity used during the system peak is called “on-peak usage.”

So, why do our wholesale power rates work this way? Simply put, there must be enough generating capacity available to provide sufficient electricity to cover the monthly system peak requirements. Think of it as an availability charge. If there is not enough generation available to meet the system peak, expensive new power plants, transmission lines and substations must be built. As an example, if CEC normally tops out at 50 megawatts of power during a mild month, but on one very hot summer day during that month requires 80 megawatts of power, CEC will be billed on its system peak of 80 megawatts for the whole month — even if we only reached that level of demand for a few minutes.

Let’s take a look at the typical CEC family on a hot summer day. Parents are at work and children are not hanging around the house. Few appliances have been used during the day, the lights were turned off, and the air conditioning was set to a higher daytime temperature. CEC’s power requirements of 50 megawatts is low during this time. As the family returns home, they turn down the air temperature to cool the house, use the oven to make supper, turn on the TV and start the laundry. The family’s single-highest point of electricity usage for that day has been reached between 4:30 and 6:30 p.m. Now suppose that 15,000 other CEC families have similar lifestyles and also reach their peak usage between 4:30 and 6:30 p.m. All of this power used at the same time has created a system peak of 80 megawatts, all of which will be billed to CEC on its monthly wholesale power bill. Subsequently, these costs are passed to you, our members.

So, why are charges for on-peak usage hidden on most of your bills? Historically, residential and small-commercial users have had very similar usage patterns, and it was more difficult to measure and bill for peak usage. In the past it has been more cost-effective and simpler to use averages of residential peak usage and build them into a single KWH rate. In contrast, members with higher power requirements, such as larger-commercial and agricultural accounts requiring three-phase services, have unique usage patterns and sizing requirements. Because of this, they see separate charges on their electric bill for both KWH and peak usage.

Will our peak usage always be embedded in a single KWH charge? Well, probably not. Gone are the days of sending a meter reader to read each meter every month. Instead, CEC receives hourly electronic meter readings that are carried over the power lines back to our office. With this technology comes the ability to create new rate structures that reward members to use more of their energy during off-peak times. In fact, the electric industry in general is already adopting many innovative rate structures to help reduce the system peak by promoting off-peak usage. They are adopting time-of-use rates, on-peak surcharges and night-time only off-peak rates (think electric vehicle charging), and incorporating programmable thermostats into peak reduction. As a real bonus, by taking measures to reduce the system peak and thereby reducing the pressure to build new power plants, we can also be considered to be environmentally friendly.

Today, CEC offers off-peak rates for irrigation, dual-fuel electric heat and large three-phase commercial accounts. We also provide a monthly bill credit to those members who are on CEC’s controlled water heater rate. Those participating in these programs receive costs savings on their electric bills, and the co-op recognizes reduced peak charges on our wholesale power bill.

In 2017, a major focus by CEC’s directors and employees is to implement additional programs to encourage each of you to reduce your on-peak usage and reduce your electric bill at the same time. We look to introduce a number of additional options that will help reduce “the elephant in your electric bill.”

In closing, I want to acknowledge that this issue will reach you in early January, and I want to thank you for your patronage and support this past year. Stay safe and stay tuned as we roll out new money-saving and peak-reducing programs in the upcoming year.

 

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