Subsections
The demand charge is a fixed cost per peak kilowatt charge that is multiplied with the highest electrical usage averaged out for a fixed increment of time (usually half-hour) to obtain a total dollar amount to be added to each month's bill. The demand charge allows electric utility companies to recoup the capital costs associated with having enough generating, transmission, and distribution capacity to satisfy their customers needs. Under some rates, the highest half-hour demand in a given year is used to calculate the demand charge. That demand charge is then applied to every month, rather than charging for each month's peak. Known as ratcheting, this method of charging for demand can cause a huge increase in the cost of electricity. Ratcheting may also be applied on a seasonal basis rather than an annual one. Like energy charges, demand charges often have seasonal variations. Typically, monthly demand charges are near $15/kW in the summer season, and $5/kW in the winter season.
The newest electrical rates vary on an hourly basis. These rates have been established to function in the new deregulated energy environment. The projected cost of generating electricity on an hourly basis for the next day is determined by the utility. The customers are then allowed to download this information and use it to plan energy saving measures they deem necessary if the price of energy becomes inordinately high. If the customer is large enough, prices can be provided one hour ahead of time rather than one day. Providing companies with the hourly cost of electricity can be important since hourly energy charges on a given day can spike up in excess of $0.80/kWh.
In almost every case, the power companies' newest rate structures are intricate and complicated. Any decision to cogenerate electricity must be made only after a detailed analysis of how doing so will affect utility charges, for which an in-depth understanding of the electric rate structure is essential. Most utilities now employ customer representatives with detailed knowledge of the new rate structures and are able to make suggestions on which rate structure can yield the lowest energy costs for a given electrical profile. However, it should be noted that these are representatives of utility. It is in the best interests of the utility to maintain maximum profits from each of their customers. Since cogeneration causes the company to lose electrical sales, the advice from a utility representative can be biased. It is important to understand the details of the rate structures in order to allow the consumer to make an informed decision concerning rates.
It is this same utility grid which will allow for the coming deregulation of the electric industry. Competing utilities will be able to sell electricity to customers that formerly could only buy from a single utility. The competing utility would have to charge for electrical consumption as well as electrical transmission. The expense associated with long distance transmission (i.e. Southeast to Northeast) will act to somewhat protect high energy cost areas (Northeast or California). But even now large brokerage firms are being established that will contract for huge volumes of electricity from a under utilized generating plant, then sell at reduced rates to neighboring utilities' customers. In fact, some of the newest players in the deregulated environments are former utilities that have divested themselves of their generating capacity and will function purely as energy brokers. For large consumers of electricity, the cost saving potential of a free market utility industry is considerable.
For the local gas consumers, two basic types of gas service contracts exist; firm and interruptible. Firm service guarantees that the gas company will provide an amount of gas agreed to in a contract. It is important to note that the contractual charge to guarantee firm gas delivery can be quite steep, so overestimating firm gas needs can be expensive. It is therefore important to know exactly how much firm gas is required for operation with out interruption.
In an interruptible contract, the gas company may interrupt any gas disbursements to the customer above the firm gas contract. Gas companies do this when demand is high, on particularly cold days for example, due to pipeline capacity limitations . The benefit of an interruptible contract is the reduced cost. Gas purchased in an interruptible contract can be as much as 50% less expensive than firm gas on a per therm basis. During times of interruption, the customer must have an alternate fuel supply to meet thermal needs. Alternate fuels are more expensive, but the large savings realized by using interruptible gas make interruptible contracts a good economic choice.
In certain cases, gas companies offer low cost gas incentives to install
gas fueled equipment. Absorption chillers and gas cogenerators often qualify
for reduced cost gas. Although interruption rarely occurs in the summer
during times of high electrical cost, interruption in service is still
a concern, especially when using a gas turbine generator. Turbine generators
experience increased maintenance and lower fuel to electrical efficiency
when burning substitute fuels. Also, gas turbine generators will only run
on light grade fuel oil, which is the most expensive alternate fuel source.