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Energy Efficiency MeasuresENERGY RATES AND BILLSWhen planning an energy retrofit, it is useful to begin with a thorough examination of a facility’s energy bills. The primer below will help you understand the sometimes arcane and complicated nature of bills and rates, so that you can maximize the savings of your energy efficiency improvements. The basic unit of heat energy in the U.S. is the British Thermal Unit, Btu, the amount of heat necessary to raise a pound of water a degree Fahrenheit. A million Btu is written MBtu and is the energy equivalent of about a person year of labor. The table and chart below show units and relative costs for eight common forms of energy, based on estimated average costs paid by commercial and industrial consumers in Colorado in the winter of 2003-2004:
In developing an energy retrofit strategy, it is useful to begin with a thorough examination of energy bills and utility tariffs, which include rates (see links below). Examining patterns of consumption and cost by season and other variables helps to identify opportunities for energy and bill savings. Utility tariffs are somewhat arcane, but it is worthwhile checking details of your company’s tariff and others that may also apply to your circumstances to minimize costs. Sometimes a business customer who might qualify for a less expensive rate is accidentally charged at a higher rate. Thus, examining the utility’s tariff structure with care combined with a conversation with a customer service representative of the utility is appropriate. ELECTRICITYElectricity is usually the greatest energy cost item for commercial and industrial businesses, as well as for agricultural operations. Whereas residential customers are only charged for electrical energy (measured in kilowatt hours, kWh), larger customers are also charged for demand (measured in kilowatts, kW). Demand is the instantaneous use of electricity, while energy is use over time. In Colorado, electric rates for commercial and industrial customers are relatively high for demand but substantially lower for energy. Thus, a typical 80,000 square foot commercial office building may have a monthly bill of $12,000, of which $8,000 is due to demand charges at $12.50 per kW and $4,000 due to energy use at $0.02 per kWh. This corresponds to a composite equivalent rate of $0.06 per kWh, the figure used in the above table. A utility must be prepared to meet the highest demand on the grid, which usually happens on hot summer afternoons when residential customers are air conditioning and commercial and industrial customers are still in full operation. To meet this demand, they must build power plants or buy power from other generators (which is quite costly during peak periods). Accordingly, rate structures are designed to charge commercial and industrial customers for their greatest peak demand (typically averaged over a 15 minute period) over the past month, or a percentage (e.g., 75%) of the highest peak demand over the preceding 11 month period, whichever is greater. (The figures in this example are specific to Xcel.) For most commercial and industrial customers, the level of electricity demand varies substantially over a 24-hour period. For example, on business days, the overall demand on the grid is much lower at 3 a.m. than at 3 p.m. Accordingly, utility tariffs may incorporate time-of-use rates. These rates effectively provide incentives for customers to use less energy when demand on the grid is high—and use more when overall demand on the grid is low. In the case of Xcel commercial customers who get power at secondary voltage levels, on-peak demand charges are $7.82 per kW, whereas off-peak demand charges are $5.43, less by 31%. “On peak” periods extend from 8 am to 10 pm on weekdays, holidays excepted. “Off peak” periods cover all other times. Given these circumstances, commercial and industrial electricity consumers can save money by saving energy at any time, but especially when approaching their own peak demand periods. In evaluating the cost effectiveness of potential energy savings projects, it is important to consider both the reduction in demand and energy charges. Further, it is cost efficient to shift as much load as practical into times when rates are lowest. For example, it may be possible for a large office complex to meet its cooling needs by producing ice during off-peak periods and using it to supply space conditioning in the heat of the day. This avoids running high-demand chillers when electricity costs are at a maximum. In addition, adopting alternative energy sources such as gas-fired chillers or solar photovoltaic systems can be a cost-effective strategy to reduce peak load. If commercial and industrial customers are able to respond to utility requests to interrupt their service from time to time (usually during periods of high demand on the grid), they may quality for interruptible service tariffs. These can save customers money. However, if a customer on interruptible service fails to respond to requests from the power company to shut down, substantial penalties may follow. To take an example of Xcel’s rate structure for commercial customers whose demand is greater than 500 kW and receive voltage at secondary levels, service and facility monthly charges are $15.30 while demand charges are $12.55 per kW. If the customer chooses an interruptible service tariff, service and facility charges are $195 per month. However, the more interruptions elected and the shorter the time between being notified and the interruption period beginning, the lower the demand charge:
Penalties for a customer’s failure to interrupt upon receiving an interruption signal from Xcel are also a function of the interruptible tariff selected. The Penalty Charge per kilowatt hour is $4.00 for customers who select the unlimited interruption option, $2.00 per kilowatt hour for customers who select the 20 interruption-days/year option, and a $1.00 per kilowatt hour for customers who select the 10 interruption days/year option. Secondary standby and supplemental service tariffs and detailed regulations apply to companies that generate their own power, but which may need back-up power from the utility from time to time. In general, customers are required to pay a substantial monthly service charge for running their generation equipment in parallel with the utilities’ grid. In addition, if power is taken from the grid, the customer is required to pay a demand charge each month at a rate comparable to the rates paid by other customers of the same service class who do not generate any of their own power. Industrial customers can sometimes qualify for lower rates by taking higher voltage service. This may require the purchase of a step-down transformer, but such an investment may be recovered quickly in lower energy bills. Finally, some utilities have a flexible pricing structure they offer to large consumers who threaten to generate all or a portion of their own power or switch their service to another provider. Practically speaking, this means that a customer may be able to negotiate a discounted price for demand, energy, or both. When an arrangement between a customer and the utility to secure discounted electricity under the flexible pricing structure is struck, the customer is required to guard as confidential the terms and conditions of the flexibly-priced contract. Xcel’s policy, for example, is to maintain the option of immediately terminating a flexibly-priced contract if the customer breaches confidentiality. Add-onsTariffs for Commercial and Industrial customers usually include a host of charges in addition to those directly related to energy use or demand. These can include:
NATURAL GASTariffs for natural gas are only somewhat less complicated than those for electricity. Gas is metered by the cubic foot, but charged by units of energy, typically the therm or decatherm. A therm of natural gas is the energy equivalent of 100,000 British thermal units and is nominally equal to 100 cubic feet of gas. A decatherm (Dth) equals a million Btu. Utilities offer commercial gas service at fixed rates and interruptible rates, the latter costing less. With interruptible rates, there are substantial penalties associated with using gas when the supplier has asked for a curtailment. With both fixed or interruptible tariffs, there a number of surcharges, the most important of which reflects the utility’s cost of natural gas. Other charges reflect franchise fee surcharges and occupation taxes, and demand side management charges. Should the utility have difficulties in providing high-quality service (e.g., experience gas leaks or have metering problems), customers are credited moderate sums. Flexible pricing structures are also possible for gas customers who threaten to do business with others. This is particularly important, since many large gas users are able to secure natural gas from providers of pipeline gas, typically for commodity costs that are lower than those offered by the utility company. In these cases, the utility charges a fee for transporting the gas and metering it. Rates for transportation depend on whether the service is fixed or interruptible, and anticipated volumes are typically specified, with penalties for exceeding them. There are often several rate structures under which a given business can be charged for natural gas. If asked, the utility company’s representatives will explain the differences in various rates and assist in the selection of the rate schedule most suitable for the customer’s needs. Choosing carefully can save money. STEAMXcel operates a steam loop in downtown Denver, and under economic conditions favorable for both the customer and the utility, the company is willing to offer steam service elsewhere in its service territory. Steam delivered directly to the user’s site saves the customer the expense of a boiler, the fuel to fire it, and associated maintenance costs. Steam can be used for space and hot water heating, sterilization, and (through absorption chillers) space cooling. The energy content of a pound of steam is 970 Btu’s. Steam is sold in thousand pound units (MLB). The primary cost of steam is the sum of a base rate and a fuel adjustment cost, presently about $12.35. A monthly service charge, franchise fee, and taxes raises the cost to roughly $14 per MLB or about $14.43 per million Btu. Thus the cost per unit of energy for steam in downtown Denver is slightly more than twice that of natural gas. As with large electricity and gas users, there is a “flexible pricing policy” the utility can offer a company if it chooses. Details on Xcel’s steam tariff are available at: WEBSITESElectric and natural gas tariffs for most of the major utilities in Colorado are also available on the Internet at the websites shown below. Aquila, Inc. Colorado Springs Utilities Fort Collins Utilities Longmont Power and Communications Mountain View Electric Association Xcel Energy Additional information can be found on the website of the Colorado Public Utilities Commission, at http://www.dora.state.co.us/puc/. |
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