Rubber stamping electric bills is a secret no one wants to talk about; not you, not the company you work for and certainly not the utility company who bills you!
Electric bills can seem mind boggling when your area of expertise is managing buildings versus kWh and demand fees. You need answers now and utility companies are usually as illuminating as a blown generator. Understanding the anatomy of a bill sheds visibility on why your expenses are in or out of line with your budget.
First, there are four basic types of charges:
- A Service Charge is a catch-all fee that’s charged on every bill for operational costs such as printing, overhead, customer service and maintenance.
- The Energy Charge is a standard measure of a unit or kilowatt hour (kWh). The kWh = the measure of electricity you use x the length of time you use it.
- A Power/Fuel Cost Adjustment is a way for utility companies to charge back operational expenses that fall out of budget. Example, if the expense of running a power plant is more than budgeted, your bill will be adjusted upwards by a proportional share to cover those expenses.
- Demand Charges can be a large part of your electrical bill. A demand charge is based on when you use your energy and whether you’re using it during a ‘peak’ demand time. If you have a bill related to a piece of equipment that requires significant energy during specific periods of ‘peak’ time, this could adversely impact your bill. Whereas, if your equipment uses relatively equal energy all the time, your bill would be less impacted. Peak demand use = big bills.
The last critical piece to understand is the rate structure and whether it’s correct or the best option available. There are seasonal rates, tiered rates, time of use rates, and now “real time” rates on smart meters. In addition, there are commercial rates and residential rates. By finding your rate type on your bill and reading the utility provider’s rate structure you can better understand what you’re paying and why:
- A seasonal rate goes up or down based on the time of year. For example: A utility may charge a higher electrical rate in summer versus winter.
- Tiered rates generally charge customers more if they use more and less if they use less.
- A flat rate is simple; it won’t fluctuate based on usage and time. It always stays the same.
- Time of use does fluctuate depending on when you use it. For example, a utility provider may charge more for residential clients in the mornings and evenings when most people are home and using the most electricity. Or, a commercial client may be charged a higher rate from 9 AM to 5 PM when office equipment is at its peak use.
- “Real time” rates on smart meters are based on the actual time you use the electricity against the actual cost a utility spends at that same time to generate the electricity.
Armed with basic knowledge you can better dissect your bill. You may even find that you qualify for a lesser rate, such as a commercial or residential rate based on your usage patterns. Maybe you can adjust a high energy consuming piece of equipment to run at a cheaper time without impacting performance? Aim a strong light at your next big electric bill and see if there’s an opportunity to take power over your utility expenses.