Understanding Your Electric Bill

You may not realize it, but your monthly electric bill is a valuable tool. It tells you what, when and how you spend your energy dollars every month. By knowing how to "translate" these dollars and cents into energy use information, you can identify energy and cost-saving opportunities. Then, after you’ve taken steps to reduce energy use, your bill can act as a "score card" and give you monthly feedback on your progress.

Most electric bills are complex and can be difficult to read or understand. As a facility manager, you might not even see them on a monthly basis.

However, the operating decisions you make each day directly affect your bill’s bottom line.

For example, operational issues such as flow management, equipment start/stop schedules and preventive maintenance contribute to each month’s bill. If you start reviewing your facility’s bills, you can make smarter energy efficient operating decisions and better manage your own budget. Also, by understanding how energy is measured and billed, you can discover ways to reduce energy cost by controlling when and how energy is consumed.

ENERGY 101: HOW ELECTRICITY IS MEASURED

Your electric utility measures your facility’s electricity use in two ways, energy and demand.

Your electric meter measures your total electric energy consumption over time; this consumption is measured in kilowatt-hours (kWh) of electricity. For example, if you operate

a 2 kW electric heater for five hours, it consumes 2 kW x 5 hrs = 10 kWh. Your bill will include a charge for the energy used by this heater and every other electric-powered piece of

equipment at your facility. Figure 1 illustrates electric consumption, as represented by the shaded area under the curve.

Your electric meter also registers electric demand or the maximum amount of energy you use at one specific time (typically a 15 minute period). Demand is measured in kilowatts (kW) of electricity.

In general, nonresidential customers pay demand charges while residential customers do not.

Throughout a billing period, a demand meter records the power load for each 15 minute period. For the electric heater mentioned above, its contribution to the metered demand would be 2 kW at any time the heater is operating. Figure 1 illustrates peak demand as well; it is represented by the highest point on the curve. This demand level indicates how much electricity your electric utility must provide to meet your largest demand for the month.

You are charged for this demand, even though you may operate at this level for only one 15 minute period during a month’s billing cycle. You can think of demand charges as "overhead" expenses that your utility incurs for providing the electric infrastructure that is capable of meeting your largest load. The utility company then passes this cost on to you. If you (and other electricity users) can reduce peak demands, then utilities will not need to maintain as many power plants or build new ones.

THE BOTTOM LINE: THE BILL COMES DUE

Your electric bill will contain separate charges for energy consumption and demand. Energy consumption is billed at a flat rate ($/kWh) that is multiplied by the total kWh used during the billing period. Electric demand is billed at a specific charge ($/kW) that is multiplied by your facility’s peak demand during the billing period.

Typically, electric utilities base demand charges on daytime peak demand. Daytime or "on peak," is generally a 12 hour period weekdays (for example eight A.M. to eight P.M.).

Utilities’ generating and distribution systems are most heavily loaded during these peak use hours. Some utilities may also use your maximum annual peak demand to set your minimum

demand charge for each month of the year, even if you use less electricity during a particular month. This arrangement is referred to as a "ratchet charge." This is typically referred to as "customer demand". Additional charges are also added for facility charges, taxes and fuel cost adjustments, but these charges are generally related to your overall electricity consumption, not your facility’s demand charge. In general, the higher your facility’s electricity consumption and electric demand, the higher your utility bill.

TAKING ACTION: NEXT STEPS

When you understand how your facility’s electricity use is metered and billed, you can better manage your energy consumption. Then you can take steps to make operational changes to reduce these costs. For example, energy- and cost-saving steps can include:

_ Developing a comprehensive energy and cost reduction plan and sharing it with your operators.

_ Making utility costs known to operators/personnel.

_ Getting copies of your electric bills and keeping a log/chart of monthly use and costs.

_ Setting goals and targets for both energy consumption reduction and demand reduction.

_ Looking for periods of unusually high or abnormal energy use and determining the cause.

_ Identifying the time of your peak demand, determining causes of this peak, and finding ways to reduce it. Consider possible strategies for shifting equipment operations into utility off-peak periods.

_ Finding equipment that runs excessively and using automatic controls to shut it down when not needed.

_ Setting controls so that operation is staggered (for instance two pumps that need to operate only one hour per day should be controlled so as not to operate at the

same time).

_ Understanding that utilities have different rates for different types of customers. Talk with your utility representative, and make sure you are being charged the correct rate for your facility. Inquire if there are programs offered that will allow lower rates.

_ Implementing energy efficiency measures. For assistance with understanding your electric bill, and for other energy efficiency improvements needs, contact your

Focus on Energy Advisor.