Blog Archive

Monday, August 11, 2014

Peaks and Valleys - A New Electric Rate Structure Must Help Tame Them

On Wednesday, August 6, 2014, at 3:00 in the afternoon, the City of Glasgow likely set its maximum peak electrical demand for the month. We recognized this a day ahead of time, based upon our understanding of Glasgow’s electric power customers and the weather forecast for the day.

Though we used nearly every method at our command to notify everyone and ask for help lowering this demand, as you can see from the graphic below, we still set a peak demand that was sharply higher than the previous peak for the month. That means that EPB will pay TVA a lot more money than we would if the demand had remained lower.

This is not the result we need if we are to lower our costs and keep rates the same. But even though the overall result was not what we needed, many folks did comply with our request and lowered their electric power demand during the afternoon hours, mainly by altering their air conditioning settings and avoiding the use of other large appliances during the afternoon. Their average load shape for Wednesday afternoon looks like this:

 This reveals a problem in the way our present electric rates work. Customers like these heeded our call to raise their thermostat setting and avoid other afternoon electric usage. Note how their demand dropped sharply during the time just before and after the time of Glasgow’s 3:00 peak demand. Glasgow EPB’s payment to TVA for the energy required to serve a customer that responds like this is far less. In fact, the approximate wholesale demand charge we incurred to serve this customer on August 6, 2014, was only about $18.

But thousands of our residential customers had a load shape that averaged out looking more like this.

As you can see, this load shape is actually the reverse of what we needed to lower costs. The average residential customer’s demand for the day actually was higher during the afternoon period, and that is the reason why we set a new peak demand. The wholesale cost of the demand from TVA to serve this average customer for that day was about $35.

However, over the whole month of August, both the customers who responded and those who did not, because of the antiquated nature of our retail rates, will pay about the same amount for their electric power for the month. This situation represents an inequity that we must resolve with a new rate structure. It is clear that asking for help is not going to be the ultimate solution to this problem. Eventually we will be putting a new retail rate in place that collects the proper revenue associated with serving each customer, depending on the actual costs created by the way each customer uses energy.

When such a rate structure is in place, there will clearly be winners and losers. For those that can respond to peak demand predictions and lower their consumption during the peak period, like the ones represented by the purple line below, a lower electric bill will be realized. We expect to be able to help people do that through the research we have been doing on water heaters, appliances, and thermostats for the last few years. For those that cause higher costs due to their high demand during Glasgow's peaks, like the ones represented by the blue line below, higher bills will result. 

We will continue this conversation as we learn more and more about how usage patterns impact everyone’s costs. This is only a prelude to the way electric rates will need to evolve over the coming months.However, you can start participating in this new way to think about how you use electric power right now. You can sign up for our EPB Meter Portal and get real-time information on how your home, or business, is  using energy. Just call us and we will help you get signed up for it. You can also apply for our ongoing research project with TVA, wherein we are furnishing, free of charge, a very effective ecobee WiFi enabled thermostat, to study how these devices can be used to help you become a member of the purple line instead of the blue one. Again, if you want to be a part of this early trial of these new concepts, just give us a call at 270-651-8341.