Electric utility ‘demand charges' penalize commercial businesses

Electric utility ‘demand charges' penalize commercial businesses


Why is the topic of utility “demand charges” important? In most cases, utilities are monopolies that are guaranteed a certain amount of profit.

However, sometimes the method whereby utilities gain this guaranteed profit has little to do with the actual cost of the product they supply. Electric utility “demand charges” are an example of this widespread market distortion. This means that if you have a business, up to two-thirds of your bill may have little to do with the actual energy you have consumed.

WHAT ARE UTILITY DEMAND CHARGES?

Over a hundred years ago in the early days of electricity generation, utility service areas were small, sometimes only a few city blocks. Peak power requirements came in the early evening when people came home from work and turned on their lights. At this time lighting was typically the only electricity loads that homes had.

When another house was added to the utility service area, additional electricity generation capacity had to be installed to meet the new demand. New and existing utility customers were required to pay a fee to cover the costs of this additional generation. Nowadays, utilities can forecast service demand with great precision, and thus do not need to add additional generation capacity to meet the power demands of your existing business.

Power generation now is generally comprised of base load power plants, intermediary generation and peaking power generation. Base load power generation usually consists of coal-fired power plants, nuclear plants, and traditional hydroelectric.

Intermediate power generation is often comprised of older costlier coal plants, and some lower costs natural gas generation.

Peaking power is usually natural gas generation that can be brought online and offline quickly according to peak power demands.

WHAT CAN YOU DO TO REDUCE DEMAND CHARGES?

Demand charges can unfairly penalize certain commercial electricity customers; and electric utility demand charges especially penalize premium peak power produced from solar. What can you do at your business to reduce these antiquated utility demand charges?

First, be certain that your business is using the correct utility rate. A simple rate analysis may demonstrate that your business can use another available utility rate without demand charges.

Rate analysis done by Atlasta Solar has found numerous instances where commercial customers fell well below the threshold of utility demand charges, yet the utility continued to charge the customer hundreds of dollars a month for demand charges.

Simply switching to another electricity rate structure can immediately save you hundreds of dollars a month.

Two, the use of newly available and inexpensive automated energy monitoring equipment can keep you attuned to the power demands of your business. If you can measure it, you can manage it.

Three, relatively easy methods of managing power demand such as staging lighting and motors can keep your demand charges much lower.

Investing in solar power can decrease or eliminate your energy charges and reduce your demand charges dramatically. Solar power can generate all of the energy your business needs. Investing in solar power can also allow you to take advantage of a new solar power rate from the utility, which cuts your demand charges in half and pays you a premium for the solar power that you produce and use.

Electric utility demand charges are a century old obsolete method of measuring power that unfairly penalizes certain commercial customers. It is time the utilities change their outdated methods of valuing electricity. Solar power is peak power and clean power and must be valued as such. Call Atlasta Solar Center today at 970-248-0057 to have a rate analysis completed for your business.


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