The next backlash? Why you need to educate C&I customers about demand charges

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As energy services expert Lindsay Audin explains below, changes are underway in the way power is priced. In short, rates are increasingly stressing peak demand.

 

Yet many (most?) commercial & industrial customers don't understand the implications. And when their bills are higher than expected, they get angry. And when they get angry, they complain, to their utilities and to their regulators.

 

You can short-circuit this impending backlash by educating your C&I customers to read and understand their bills. It's just that simple. - Jesse Berst

 

By Lindsay Audin

 

Changes are coming to the way retail power is being priced. As coal-fired power plants are retired, new transmission lines built, solar panels installed, and smart meters hooked up, utilities and grid operators are introducing more demand-based electric rates.

 

Using euphemisms like "expanding non-fuel revenues," rates are being promoted that are based more on monthly and/or annual peak kW demand than on kWh consumption. The proliferation of smart meters has also fostered new time-of-use (TOU), real-time (RTP) pricing that greatly increases the cost of kWh consumed during on-peak hours.

 

To avoid being blindsided, commercial and industrial (C&I) customers need to finally read and understand their electric tariffs and power contracts.

 

The impact of these changes is, or will soon be, felt more in some areas more than in others. At the wholesale level, capacity fees (which act like annual ratchet charges based on the highest summer kW demand) are, for example, rising across the northeast and some mid-Atlantic states. Those costs get passed down to the retail level via fuel adjustment charges and/or higher monthly demand charges. In some areas, such costs make up 50% or more of a customer’s electric bill.