Electric Rate Comparisons and Conclusions

The period during which power is used affects operating costs as much as, or more than, the amount of power used. This concept becomes critical in energy use planning as price differentiation by time of use increases.

While accountants may look at electric operating costs in terms of the average cost per kWh, energy use planners must look at the incremental costs of individual end uses and various consumption profiles to understand price impact. Energy planners audit facilities to develop incremental cost-usage profiles associated with individual equipment, systems, and activities. These audits are done in much the same manner as the ten profiles presented in the preceding pages.

Planners look at seasonal end uses, such as cooling, and understand that the relevant weighted average cost per kWh may be several times greater than the facility's overall average cost per kWh, especially if a ratchet adjustment is in effect. They look at baseloaded operations and consumption blocks and understand that the costs may be lower than the facility's average cost. They look at identical devices, in a multiple-unit system, that run the same amount of hours per year, and they understand that if they operate with different load profiles, their operating cost may be dramatically different.

Evolving RTP electric rate structures may extend this discrete differentiation to every hour of the year, or perhaps even every minute. An important benefit of RTP rates is that one peak hour of extraordinary usage might not have the dramatic cost impact that a rate with a high demand charge and ratchet adjustment would have. This type of rate flexibility is well suited for electricity purchase strategies that involve a mix of on-site power generation or purchase of non-utility-generated power along with the purchase of utility provided power. In the event of retail purchase of non-utility-generated electricity, traditional, TOU or RTP type rate structures may be applied to transmission and distribution services, while some type of RTP structure would be applied to the usage for the purpose of commodity transaction.

With this understanding, energy planners develop strategies to minimize operating costs and optimize productivity. Efficiency improvements and alternative energy source options are considered with respect to these incremental costs. Self-generation and electricity displacement strategies should be evaluated in the same manner. Electric cost savings opportunities should be considered on the basis of incremental cost per kWh, as well as the total usage. Elimination of 1 kW of low-load factor usage should produce larger cost savings per kWh than the elimination of 1 kW of high-load factor usage, even though it may not produce greater aggregate energy savings.

Following are explanations for each of the profiles and a discussion of the type of equipment usage or facility characteristics that would result in each profile. Also included are examples of how load factor, annual cost, and weighted average cost were calculated.

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