Energy vs Power

Understanding What Demand Response Can Do for You

So what is demand response? It is a change in USAGE of energy of an electric utility customer to better match the demand for power with the supply. It can also be thought of as a method of how electric companies compensate for the extra energy used during a “peak time”. When you hear “peak time”, think of a hot Alabama summer day when everyone is running their air conditioners at 2 PM.

What is demand?

Electric energy cannot be easily stored, so utilities have traditionally matched demand and supply by throttling the production rate of their power plants, taking generating units on or off line, or importing power from other utilities. But there are limits to what can be achieved on the supply side, as some generating units can take a long time to come up to full power, some may be very expensive to operate, and demand can be greater than the capacity of all the available power plants put together. Demand response is one of the solutions to these limits and seeks to adjust the demand for power instead of adjusting the supply.

At the consumer level, demand response is a way for certain areas to maintain adequate power during busier peak times and can save them money in the process. One example of this was in 2016, when the New York City grid “shed load” by reducing power at a number of public services, including the Metropolitan Transportation Authority; and utility ConEdison activated a voluntary program to adjust consumers’ air-conditioner thermostats at peak hours. In exchange for participating in these voluntary programs, electricity customers received a rebate varying in amount based on participation.

To help visualize what this looks like, think about the traffic on an interstate. Everyone suffers if the traffic is at a standstill; but once portions of traffic begins taking proper detour routes or delaying their trip, it allows everyone to get to their destination faster. Similarly, if some consumers participate in demand response by lessening their own energy use, or when they use it, then everyone on the grid can maintain their energy usage during peak hours at cheaper prices.

While the main goal of demand response is to maintain energy availability through all times of the year, consumers can earn financial rewards by participating. In many states, regulators create incentives for utilities to use less energy, especially during peak hours of the day. Demand response programs were originally put in place to avoid having to turn on “peaker plants,” or auxiliary power plants that may be used only 10 days a year to meet the traffic of high demand days. You can imagine how expensive these “peaker plants” are to operate by thinking about if we added lanes to our highways just to accommodate Black Friday traffic.

Instead of building new power plants to meet demand, utilities instead can rely on demand response. For example, in New York, 543 megawatts of demand reduction are available just from commercial and industrial customers participating in demand response, which is about the same capacity as a medium size power plant. Keeping these plants idle also helps keep the price of power down, which saves money for the entire customer base. Instead of having to call on very expensive power generators to meet high demand in the late afternoon, grid operators can reduce the load in the system and avoid paying peak-time pricing.

Much like consumers, demand response saves the system money, sometimes on the upper end of millions a week, but the program also creates a better and safer grid in doing so. The grid benefits from not needing to build any extra power plants to supply power during those “peaker times”, which are only about 10 days out of the year, which in turn would require extra power to operate and build. Furthermore, if consumers are using the demand response program, the grid will be less taxed for power output on a daily basis. By conserving energy, grid alterations can be delayed or significantly reduced. In an electricity grid, electricity consumption and production must balance at all times; any significant imbalance could cause grid instability or severe voltage fluctuations, and cause failures within the grid. Don’t forget that demand response can ALSO be used to INCREASE demand during periods of high supply and/or low demand, which, unchecked, could cause an imbalance.

Overall, demand response is beneficial to everyone involved. It saves consumers, businesses, and utilities, money and helps the grid run more efficiently. If given the opportunity, everyone should opt-in to this program for themselves, the grid, and the environmental benefits from using less energy. And if you don’t currently have the opportunity, ask your utility and your Public Service Commission about starting demand response programs to save you money.

Related: Probing Residential Demand Charges

Are Fixed Utility Charges Bad for Customers?

As solar energy and energy efficiency becomes more common, many electric companies have responded by dramatically increasing, or attempting to increase, monthly fixed utility charges.

What are fixed charges?

Fixed charges are static charges that occur on a regular basis. Most utilities have fixed charges, sometimes called an availability charge, on your monthly bill. Typically, this charge is small (less than $15-$20/month) and is normally in place to cover fixed costs a utility must provide in order for you to receive their service. An example of a fixed cost is the meter on your house and/or the expense to read it each month.

Throughout the United States, utility companies and, to a lesser degree, electric co-ops are charging solar users a fixed cost to re-coop the perceived loss of revenue from the users going off the grid, reducing their demand from the utility, or even just to discourage the use of new technologies.

The idea of large fixed cost increases originates from a suggestion in the “Disruptive Challenges” report released by Edison Electric Institute in January of 2013. Since the report was released, many solar users have seen fixed charges affect their monthly meter bill; sometimes costing as much as 50 dollars extra each month.

Fixed charges not only affect existing solar users, they have the potential to deter future users as well. Solar paying for itself is one benefit that is slowly being taken away; with one user saying, “I think the fixed fee for solar is excessive. When I do the cash flow that amount takes 25 percent of my monthly profit. It would take an extra three to four years to get the project paid off.” Most fixed charges push the payback on installations from a 10-year plan closer to a 13- or 15-year plan before the consumer begins to see that benefit.

David Shaffer, an attorney and development director of Minnesota Solar Energy Industries Association, said a high fixed charge, “decreases the cost-effectiveness of solar arrays and elongates the payback period,” he said. “Selling solar is based on the payback. If you get payback in under 10 years it’s a great deal, but if it’s beyond 10 years it gets more difficult.

Fixed charges cut into the viability of selling solar in those (rural) areas because financially it doesn’t make sense.” Another issue with fixed rate charges is their inconsistency. During 2014, as many as 23 fixed charges proposals were being considered by state regulators across the country and that trend continued through 2015.

In Minnesota alone there are different fixed charges depending in the company. Meeker Cooperative has a $55 net metering charge on an almost 40 kilowatt system, Xcel Energy has a flat fee for $10 a month for all customers but nothing specific for solar users, Minnesota Power has a monthly fee of $2.55 a month for a 20 kilowatt system, and the list goes on.

The increase in fixed charges hits close to home in the Southeast too. In the Southeast, electricity markets are primarily served by large integrated utilities. The Southeast also lacks a single regional transmission organization or independent system operator that establishes the economics of real-time transmission costs and contracts for ancillary services, or anything that supports the transmission of electricity from its generation site to the customer. Therefore, the responsibility falls to the co-ops, municipal utilities, and regulators to create smarter rate design and make economic decisions on the cost of service and constituent feedback. This often means individual states or regions are at the mercy of one company or local regulators who may not be as well versed in the intricacies of the electric market.

In a report conducted by the Kansas Corporation Commission, they concluded that increased fixed charges in Kansas would increase electricity use by 1.1 to 6.8%, varying by utility and season. This means the projected increase would be greater than all the energy savings from all the energy efficiency programs in the state. The same report found that such a change in rate structure and consumption would offset the financial benefits of decades of energy efficiency efforts and penalize customers who have already invested in or installed energy efficiency measures under the previous rate structure. The increase in fixed charges would weaken the incentive for future investors in energy efficiency, which could have negative impacts on the local economy and environment.

There is hope the trend may stop sooner than later. Regulators and stakeholders of utilities have begun seeking a new approach to fixed costs, with one idea being a demand charge that reflects the amount based on customer usage. One reason for this is the benefit energy efficiency will provide to the utility companies and customers alike. Contrary to some utility claims, solar is projected to decrease system costs for utilities. A new study by Rocky Mountain Institute shows that distributed energy resource (DER) customers with solar and battery storage provide value to the grid by reducing peak demand, deferring or avoiding system upgrades, relieving congestion, and providing ancillary services. In addition, other studies by utility regulators have found the value of distributed solar to exceed retail rates. For example, Nevada regulators found that the value rooftop solar adds to the grid is 18.5 cents/kWh, Mississippi 17 cents/kWh, Maine 33.7 cents/kWh, Minnesota 14.5 cents/kWh, and Vermont 25.7 cents/kWh.

Implementing fixed charges as blunt instruments will only result in a missed opportunity for utilities to align the interests of customers using DERs with those of the grid as a whole. Although still a work in progress, one thing is for certain. Massive hikes in fixed charges are bad for consumers, utility companies, and solar users everywhere.

Alabama Power’s Higher Fixed Charge Rate Options Deserve Careful Scrutiny

A few “lucky” Alabama Power customers will soon receive invitations to switch to one of two new rate pilot programs, called “Residential My Choice” or “Residential My Choice Plus.” Both raise the fixed monthly charge – by 260 percent and 400 percent, respectively – and lower the charge that’s based on how much power a household consumes.

It’s a worrisome move that could have implications far beyond the bills of a few customers.

The Alabama Public Service Commission (PSC) approved the new rate programs very quickly, just two weeks after they were requested on May 25. They’re voluntary and experimental… for now.

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Energy Alabama Helps Local Churches Save on Utility Bills

HUNTSVILLE, Ala. – Energy Alabama is hosting an energy bench-marking event for local churches and houses of worship. The event is specifically designed to help them cut back on utility costs.

Many churches around the Valley use a lot of energy throughout the week. Sometimes their design isn’t the most forgiving to energy efficiency.

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utility bill explained

Your Huntsville/Decatur Utility Bill Explained

It’s that time of the month: bills. You go to your mailbox and get those white envelopes. You get to your utility bill and open it up. All the other times you’ve gotten this bill, you just look at the amount you owe, write the check, and you’re done with it. But, this time, you open it, and you decide you want to know what the heck you’re actually being charged for. Well, we are here to help! We are going to be looking at a couple of bills from Huntsville Utilities and Decatur Utilities and break them down so can find out what they mean for you.

Huntsville Utility Bill Explained

The image to the right  is a sample of the front of a Huntsville Utilities bill. The top sections are pretty obvious. They are the parts of the bill that tell you your account information, what you owe, and when you owe it by. Below that section, there are a couple of parts that break down your usage. The sections we are going to look at are indicated in a red box marked with a red A and a purple box marked with a purple B.

Section A: This section details the meter reading.  The utility company uses the meter reading to determine how much electricity you used that month. This section of the bill shows you the date the meter was read for this month and last month, the previous and present reading, and the amount of electricity used.

Section B: This bar chart portrays the electricity usage of the past 13 months, if available. You’ll notice that in our example there is not 13 months of usage perhaps because this person has not yet lived at the address for 13 months. This is just a visual representation for you to see how your usage changes month to month.

The photo to the left shows an example of the back of the Huntsville Utilities bill. This breaks down what you are being charged for in the bill.

Section C: This section breaks down the two charges of the bill: the availability charge and the consumption charge. The availability charge is the fixed cost of maintaining service to the resident and is the same no matter how much energy you use. For example, it covers things like meter reading and maintenance. The consumption charge is the charge for the amount of electricity used.

Section D: This section details the consumption charge. In this example, this customer consumed 695 kWh (kilowatt hours) of electricity. The charge per kWh is 0.088410. When you multiply 695 kWh by the charge of 0.088410, you get the charge for the consumption, which is $61.44. Adding the $61.44 to the availability charge, $8.88 in this example, gets you the charge, before tax, of your electric bill.

Decatur Utility Bill Explained

To right you’ll find a sample of a Decatur Utilities bill. Just like the Huntsville Utilities bill, the top half of this bill is pretty self-explanatory. It shows your account information, the amount you owe, and when you have to pay it by. There is one section in this particular bill that is important in understanding your charges.

This section of the bill gives you some details of your consumption analysis. It shows you the current usage, the usage from the last month, and the usage from a year ago. The section circled in red is where the information for your electricity usage will be. In one column, it shows you the total consumption in kWh (kilowatt hours), and in the next section it shows the daily average in kWh.

Note that your utility may show more than just electricity depending on how many products you purchase from the utility company. Each of the other products, like gas or water, will have breakdowns like the ones for the electricity; the main difference will be the units in which the consumption is measured, like gal (gallons) for water.