The way you pay for electricity will be changing….
The conversation will be about demand charges vs. time-of-use (TOU); don’t let the jargon fool you: they want to charge you more.
The conversation includes the following (shown on the chart)
- Usage is the energy used in a given period, the chart below shows monthly
- Average is determined by dividing the sum of the value by their number
- Peak: the highest amount used in a period
So this discussion by utility regulators is HOW you should pay for energy consumption.
Current method: you pay a customer service fee and an average energy charge based on your USAGE. Lower usage means a lower bill.
Demand method is you pay based on your PEAK. Peak energy is the most expensive to supply as many people are using near the same time. Demand charges are substantial and will be set for 1 year or more. The only way to lower this cost, is to lower your peak energy demand.
TOU method means you pay the market based charge during the time period (normally hourly, in this example monthly) you use the energy. To lower your bill under TOU you need to be able to reduce your energy USAGE when prices are high.
Energy marketers already buy TOU. Utilities do as well, they pass along costs 1-3 months after incurred. So TOU is what everyone buys now, however, it may be delayed.
Demand method is more complicated as it allows utilities to recover costs they MIGHT occur. It also shift a great deal of complexity and measurement to residential customers.
Having consumers incur demand charges recognizes the influence that residential consumption is having on utility distribution. Demand charges have always been prevalent in commercial and industrial utility rates. As industry energy usage declines and residential increases the utilities are looking to shift their rates accordingly.
Utilities commissions need to strike a balance by encouraging local energy generation (solar, wind, storage), maintaining a robust distribution network and letting energy marketers bring market based energy prices.
The discussion are coming and the balancing has begun.
Realgy Energy Services is a registered Retail Energy Marketer in the states of Illinois, Michigan and Indiana. We offer Service Plans that will provide electric and natural gas at wholesale pricing direct to customers without any utility markup. Our Service Plans work with the local utility to provide seamless service and annual energy savings. Service Plans include Guaranteed SavingsTM, ManagedPriceTM, ManagedGreenTM Index, Fixed and PriceAssuranceTM.
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