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How To Soften Electric Rate Increases From New Rules On Coal Plant Emissions

By Lindsay Audin - September 2014 - Energy Efficiency


Facility managers in areas that will be affected by new rules on coal-fired power plant emissions should consider several measures to soften possible electric rate increases. Impacts on monthly utility bills may be spread over the next three to six years. Thereafter, average electric pricing may become more stable as new gas-fired plants come on line. Because a major change in power plant fuel may affect both the cost of electric energy (i.e., kWh) the plant produces and the value of capacity (i.e., kW), customers should be looking at ways to mitigate impacts on both.

Customers in states where utilities have been deregulated, for example, may fix their cost per kWh supply price (which may be half the total bill; the rest covers delivery) for all or part of their usage for several years at a time. A customer buying fixed price power today on a two- or three-year contract may, however, find that some of the impact of future price hikes has already been baked in to the price.

Others may need to take a proactive budget position by sequestering funds so they are available to handle occasionally high bills. Firms with large electric loads and financial flexibility may wish to consider purchasing natural gas options whose value follows wholesale markets. The same sudden jump in gas pricing that impacts a utility's fuel cost then results in increased value for such options, the sale of which may then help pay down a temporarily high fuel adjustment charge.

Demand Response

To address jumps in demand or capacity charges, consider deploying load management technologies — also known as demand response. Such activity may even offer a new source of revenue. Many utilities and grid operators offer financial incentives for the right to request that customers temporarily cut back power usage. The goal is not only to cut load when called upon, but also to enable routine brief demand reductions to trim monthly peaks, and thus the charges that result from them. Many "curtailment service providers" — the firms handling the process for a percent of the incentive — exist to help customers with audits, automation, and documentation.

Customers should stay abreast of new energy efficiency incentives from their utility and state energy agency. If a state chooses to cut its carbon emissions by improving energy efficiency, and consequently reducing power production, it may create or increase incentives that help customers install more efficient lighting, chillers, etc.

In the long term, rising energy, demand, and capacity pricing should also inform choices and specs for power-consuming devices and the systems that control them. When calculating payback periods, for example, price escalation rates should not be based on prices seen in recent recessionary years. Instead, a more realistic rate, based on advice from a knowledgeable energy supplier or consultant, should be used.

While the price impacts of a shift away from coal should start to level off by 2017-2020, in some areas it may settle at a point noticeably higher than seen today. Wherever coal has been king, customers should be preparing for a regime change.

Lindsay Audin is president of EnergyWiz, an energy consulting firm based in Croton, N.Y. He is a contributing editor for Building Operating Management.





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