The Energy Chronicles

Electric Rates Case Study

Successful businesses in today’s world economy pay attention to details. Competition has never been greater with buyers having global access to products and services via the internet. Those succeeding have found ways to manage costs, eliminate waste, expedite delivery, and provide a pleasant customer experience, just to name a few. Provide a quality product or service at a fair price; if you don’t someone else around the globe will do so.

The ongoing Covid-19 pandemic is presenting businesses with unique challenges never seen before. Some businesses have slowed to a snail’s pace while others are furloughing staff. Those on staff are particularly cautious guarding against the virus. Supply chains have been interrupted. Orders just aren’t coming in; it seems like the business world is on hold. Never before is it so important to pay close attention to the costs of doing business. Continue reading to learn about what goes into your energy bill, and how we can help you lower it.

The Energy Bill

infographic of Energy Bill Factors

When it comes to managing costs, an area often overlooked is energy. We use energy to light and heat our businesses on a real-time basis but receive a bill for this service perhaps a month later. We may use energy differently if we had to plug the electric meter with coins as we do a parking meter. Electric utility companies often times do a good job ensuring the customer is on the correct rate tariff based on usage parameters. However as a business grows, there may be a more advantageous rate tariff available. Generally large-volume energy users pay less on a per unit basis than smaller businesses. Successful businesses examine usage patterns month to month to ensure nothing seems out of line. If usage increases or decreases, why is this happening? Are there more production hours in the billing period? Was a third production shift added? How often does the person paying the utility bill just look at the “Pay this Amount” line? Reading and understanding the energy bill can be an onerous task to some, but certainly something worth extremely close attention.

Understanding the Electric Bill

Terms often found on the electric bill are as follows:

Kilowatt Hours (kWh) – The amount of energy used over a given amount of time. Ten one-hundred watt light bulbs operating for one-hour is one kWh.

Kilowatt Demand (kW) – The amount of energy measured instantaneously on the electrical system. Ten one-hundred watt light bulbs instantaneously draw one kW on the system. This is also known as real, active, actual, or working power.

Kilovolt Ampere Reactive (kVAR) – This is the Reactive Power that provides the magnetizing flux to power inductive loads such as motors, transformers, magnetic fluorescent lighting ballasts, and high-intensity discharge lighting. Also known as imaginary power.

Kilovolt Ampere (KVA) – This is the Apparent Power or the vectorial summation of kW and kVAR. The utility company provides kVA to serve the customer’s electrical load.

Load Factor (LF) – Load factor (as a percentage) is a measure of the utilization rate, or efficiency of the electrical energy use. It is the ratio of the total energy used in the billing period (kWh) divided by the peak demand (kW)during the billing period divided by the total hours in the billing period. A perfect load factor is 1.0 so the higher the load factor percentage, the less the cost of electricity. An example of 8,000kWh energy, 50kW demand, 30-day billing cycle would look like this: 8,000/50/720=0.22 or a 22% load factor, which would be considered very poor.

Power Factor (PF) – Power factor is the ratio of Working Power (kW) to Apparent Power (kVA). Power factor =kW/kVA So 100kW / 115kVA = 0.869 or 87% power factor. Most electric utility companies require customer loads to be at a 90% or better power factor to avoid penalties.

Time-Of-Use (TOU) – Many utility companies offer discounted rates when electrical usage occurs during non-peak hours. For instance, some utilities offer discounted TOU rates between the hours of 10:00 PM and 7:00 AM, Monday through Friday, with no usage penalty for weekends and holidays.

Seasonal Rates – Most Midwestern electric utilities are summer peaking and can offer discounted rates October through May. The months of June through September are considered summer rates when the demand for energy peaks due to air conditioning adding to the demand on the electrical infrastructure.

How to Make Improvements

There are ways to improve a business’s load factor by careful examination of the kW demand during the billing month. Can sequential staging of machinery be implemented to prevent additive kW demand from various motors or processes? The thought process is to use the energy (kWh) throughout the billing cycle at the least kW demand. A thorough examination of inductive loads within the facility may lead to power factor improvements. Improving the power factor enough to avoid penalties is smart business. Not only are there a savings on the bill, there is less load on the infrastructure within the facility opening up electrical space for future use. For example, a 600-Ampere electrical panel may be loaded to 500 amperes. Adding capacitors to motor terminals may lessen the load on the panel to 400 amperes with space for future use. A business either supplies their own kVARs by adding capacitors or synchronous motors or buys it’s kVARs from the utility via a power factor penalty. A detailed examination of kVAR requirements is highly recommended to make power factor improvements.

The Energy Group Can Help

two office workers collaborating
Photo by Scott Graham on Unsplash

As businesses are slowly getting back to what may be a new normal and the country is gradually opening back up, right now is the perfect time to evaluate what you are spending on energy. Think of an annual wellness physical with your doctor to validate what you are doing well and where you can make improvements to your health. An energy bill assessment is a good way to validate if your energy costs are in-line with similarly situated businesses. An on-site energy assessment from The Energy Group can validate your building and energy-intensive processes are viewed as industry best practices or are there areas for needed improvement. A well-trained energy analyst from The Energy Group may uncover low-cost energy improvements. An example is from the turn of a screwdriver; a manufacturing business saved over $4,000 annually by simply lowering the operating pressure on their compressed air system. Additionally, a rate analysis performed by The Energy Group of a school district resulted in major savings. 42 school buildings were analyzed and 14 were found to have lower energy costs on a different electric rate. 6% energy savings were found in these 14 electric meters resulting in annual energy savings of over $33,000. These savings occur year after year allowing the school district to lower their operating costs.

The Energy Group is an independently-owned, local business with more than 32-years of experience resolving energy issues, delivering savings, and improving spaces. We provide unbiased, tailored energy solutions so our clients can lower operating costs and improve their quality of life. Our clients learn that improving their building is not only good for the bottom line, but good for the economy, our health, and the planet. Some of the services The Energy Group can provide are:

  • Performing detailed analysis of customers utility bills
  • Determining if load and power factors can be improved
  • Providing design assistance and project management for capital improvements
  • Assisting with obtaining US Department of Agriculture REAP grants where applicable to cover audit costs and capital improvements
  • Providing detailed energy audits to identify energy-saving opportunities.
  • Providing sales tax studies to identify opportunities for savings of State sales taxes

Contact The Energy Group today to obtain a free consultation on how we can help you lower your energy costs. A team of engineers and certified energy managers are available to identify cost-saving opportunities at your facility. Think of The Energy Group is to your business as your doctor is to your health. Both make good sense to you and to your business. The sooner you contact us, the sooner you start energy savings.

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