The next edition of The WIRE will feature an article with helpful strategies to help reduce your facility’s electrical “spend.” We encourage readers to ask questions so that we can help clarify electric bill issues.
Understanding Your Electric Bill
Let’s take a look at some interesting elements of your electric bill. We will use the depicted electric bill as an example for educational purposes.
There are essentially two components to your electric bills – Usage and Delivery.
Usage is measured in kiloWatt-hours and is an accumulation of electricity consumed in a 30-day period. When we say kiloWatt-hours we really mean 1000 Watts multiplied by the hours of operation. So your usage will accumulate based on how much electrical load (Watts) your facility uses and how long a period of time those loads are ON. To reduce your usage, you can attempt to reduce load through the use of modern, efficient products, along with reducing the hours of operation of those loads. Your electric bill Usage dollar component then is the total kW-hrs consumed times the Rate ($/kW-hr).
In 1999 the State of Ohio opted to conduct electrical power business as a “de-regulated” industry. This meant that various electrical power generation companies could compete for generation portion of your electrical business. The idea here was that competition would have an effect of holding prices down for the consumer. Today there are more than 25 companies in Ohio that compete for electrical generation business. Customers are free to negotiate with companies to find the best deal for their home or facility.
The Delivery component of your electric bill is associated with local electric utility companies, either First Energy Corp. or Cleveland Public Power in this area. This portion of the bill is intended to provide revenue to the utility companies that build and maintain the infrastructure that allows for transmission of power to your home or facility.
The Delivery component of your electric bill is not as easy to calculate as the Usage portion. Understandably, utility companies need lots of revenue to support their vehicles, tools, materials, line-workers, fuel, safety equipment, insurance and administration. These overhead costs are affected by labor rates for utility workers, fuel costs in the region, escalating material prices, damage due to severe weather, and many other factors. There are several “watch-dog” entities that routinely monitor utility company rates and often challenge these rates under the forum of the Public Utilities Commission of Ohio (PUCO).
Demand and Power Factor
Delivery charges can be reduced by lowering the facility’s electrical Demand and Power Factor. Demand is the maximum average amount of power drawn by a facility in a 15-minute interval. The utility company’s infrastructure must be sized to accommodate this maximum Demand. This is true for the transformer, wire, and connections made directly to your facility, but also for the collective infrastructure needed in your neighborhood or region so that adequate power can be delivered to all customers. When you think about it, utility work is a demanding task (pun intended!).
The other factor that affects the Delivery portion of your electric bill is Power Factor. Power Factor is a calculation based on the make-up of Real Power and Reactive Power used at your facility. Real power is associated with resistive loads, while Reactive Power is associated with the amount of inductive or capacitive loads. Reactive loads add current to the service and feeders, and therefore require that equipment and conductors are large enough to accommodate the electrical requirements.
It’s also interesting to note that the Demand and Power Factor of your facility can affect the negotiated $/kW-hr rate with a generation supplier.
Large power consumers have the opportunity to purchase electricity via Primary Metering. With this arrangement, the customer is responsible to provide and maintain portions of the service equipment, including the utility transformer. With reduced liability and overhead expense, the electric utility company can offer a reduced Deliver fee to the consumer.
In our next edition we’ll identify measures that can be taken to reduce your electric bill.