New Technologies Mean New Rates

By Lindsay Audin  
OTHER PARTS OF THIS ARTICLEPt. 1: Understanding Electricity Bills Helps Avoid Unpleasant SurprisesPt. 2: This Page

To promote the installation of solar photovoltaic (PV) systems, some PUCs have directed utilities to offer "feed-in tariffs" that pay a PV owner for power produced with the PVs at a much higher rate, sometimes four times as high, as the customer would normally pay for the same electricity. Where the PV system is owned by a third party, that party may sell the power to the facility at the usual rate, and pocket the difference. Where the facility owns the PV, the added revenue from a feed-in tariff may be used to reduce the overall electric bill. The money to pay for such programs is collected from all other customers through an adder covering energy efficiency programs. Feed-in tariffs were responsible in Europe for greatly increasing PV installations, and are now in use in several states and at least one Canadian province.

For smaller customers installing PV, a "net metering" tariff allows the billed kilowatt-hour of a customer to drop by the amount generated by its PV system. At facilities that are empty on sunny weekends, for example, the PV power that is not consumed on site is credited as power into the local grid, thus reducing the overall bill to the facility. Facility managers should read such tariffs carefully to grasp all details, such as the rate at which excess power is paid. Some customers have received an average wholesale electric rate, which may be only half the full retail rate, thus significantly cutting the expected dollar benefit.

Smart Meter Opportunities

The advent of "smart" meters that read power use in brief intervals — 15-minute increments, for example — has opened the door to a range of tariff options and additions. As literally millions of them are being installed through federal stimulus and other funding, some utilities are seeking to expand mandatory time-of-use rates to much smaller customers. One effort to do so in Maryland did not sit well with the local PUC and was blocked. Voluntary time of use rates will, however, become available once the meters are installed.

Such meters also monitor demand responses from customers when called upon to reduce load. While the notification may be received via phone or wireless methods, the meter tells the utility if, when, and how much load has been reduced which, in turn, determines the payment for load reduction seen on the next month's bill.

Smart meters are also likely to foster a rapid expansion in real-time pricing (RTP), which is based on volatile hourly wholesale power rates that rise and fall like stocks. While presently available in only a few parts of the U.S., RTP for large customers has become mandatory in several states (New York and New Jersey are two examples) unless the customer secures power from a non-utility supplier. Voluntary RTP is becoming available as many smaller customers receive smart meters. While the country remains in a recession, RTP may yield average pricing significantly below standard utility rates, but takers should fully understand the wide swings that may hit monthly utility budgets.

To offer some of the benefits of RTP while limiting its risk, critical peak pricing (CPP) may be offered where smart meters are in use. Under CPP, very high kilowatt-hour prices ($.40 to $1.00/kWh) may be charged for a few hours on the hottest days of the year, while being reduced at all other times. Customers that are able to minimize their usage on high-cost days, when wholesale prices and grid stress are greatest, may thus secure savings while limiting their price risk to known periods. Those with energy management capabilities that can cut demand may arbitrage their equipment on such days to yield savings. In past years, such rates were sometimes called "interruptible" but had additional conditions that customers were unable to fulfill.

Smart meters are also able to monitor power factor (PF), making it possible to charge many more customers for it. Don't be surprised to see PF as a new line item on a future bill. Charging for PF encourages customers to raise it via changes to electrical equipment, thus cutting distribution losses and power plant pollution. It should be noted, however, that line losses may already be part of existing electric rates. In at least one case where new PF charges were levied, there was no concomitant reduction in such rates, making the new PF charge a de facto rate increase.

Smart facility managers are confronting such challenges by adjusting their operations and choices of energy-using equipment, and perhaps hiring or training personnel to find the opportunities and pitfalls posed by changing rates.

Lindsay Audin is president of EnergyWiz, an energy consulting firm based in Croton, N.Y. He is a contributing editor for Building Operating Management. Reach him at energywiz@aol.com.





PUCs Oversee Tariffs

The general goal of Public Utility Commissions (PUCs) is to divvy up fairly the costs of power so that it is minimized while maintaining reliability and, if the utility is investor-owned, a fair level of profitability. Members of PUC boards may be appointed by a governor or a legislative body, or may be elected.

Tariffs are the end results of proceedings held by PUCs in which many stakeholders may be represented: the utility, regulators, consumer advocates, customer groups, environmentalists, energy suppliers, etc. Influencing how rates are set requires a seat at the table, and many commercial power customers support or are members of groups that participate.

PUCs may be empowered to require utilities to initiate or alter programs within the parameters of existing law, such as adding transmission lines, handling outages, and adjusting or creating new rates. Major rate proceedings are typically one or more years apart, but between them PUCs may initiate reviews that impact other aspects of utility services, like new metering, billing procedures and energy efficiency programs.

— Lindsay Audin



Tariff Site Seeing

A utility's website address should be shown on its electric bill. To find any utility's site, go to www.utilityconnection.com.

To find any state’s Public Utility Commission site, go to www.naruc.org/commissions.cfm and click on the state.

To fully dissect an electric bill, read "Electric Charges Up Close" in the December 2003 issue of Building Operating Management which may be found at: www.facilitiesnet.com/1644BOM.

— Lindsay Audin

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  posted on 2/28/2011   Article Use Policy

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