Understanding the New Jersey electricity bill

CALMAC Mfg. Corp. 2014 ©

Understanding The Electricity Bill

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Evan BergerDirector of Energy Solutions

CALMAC Manufacturing Corp.Fair Lawn, NJ

December [email protected]

mailto:[email protected]


Conclusions1. There are three ways to lower electric costs:

a) Buy fewer units of energy.

b) Lower electricity costs by purchasing it when it’s cheaper, at night.

c) Negotiate a better rate.

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Conclusions2. Commercial Rates are Different than

Residential Rates:

a) Residential Rates are based solely on usage (kWh)

b) Commercial Rates are based on a mixture of usage (kWh) and Demand (peak kW).

c) In deregulated states like New Jersey, Demand Charges are how utilities like PSE&G make money off of their commercial and institutional customers.


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Conclusions3. Rates and tariffs are complicated.

Why? A few possible* reasons come to mind—

a) Lawyers write them

b) Regulators dislike plain English

c) The less customers know about their electricity bills, the more utilities and Third-Party Suppliers can possibly* earn more money at their expense

*Note: pure speculation


Demand Charges

Definition: any electricity charge that is assessed on a per-kW basis

In NJ, there are two types of Demand Charges:1. Utility Demand Charges2. Grid Demand Charges (in New Jersey, PJM)

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Sample PSE&G BillIf you look

for it, Demand is

everywhere.


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Utility Demand


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Grid Demand


The Demand Charge Effect

PSEG Large Power Service RateEnergy (usage):

Day: $0.085/kWhNight: $0.085/kWh

Demand: $22.00/kW/Month (4 Summer months)How big an effect is the Demand Charge??

Energy is 60% less expensive at night

$0.085/kWh

$0.220/kWh


Demand Charge Effect…..

Do the Math (Back of the Envelope)

Conventional Chiller System Demand Cost /month

1000 tons x 0.8 kW/ton = 800kW 800 kW x $22.00 = $17,600/month

Energy Usage for Chiller for Month1000 tons x 10 Hrs x 75% x 0.8 kW/ton x 22 days/month =

132,000 kWh

Approximate Cost for Demand / kWh $17,600/132,000 kWh/month = $0.133/kWh

Therefore Daytime Energy = $0.085 + $0.133 = $0.22/kWh


Calculating Utility DemandUtility Demand is based off of the peak interval

(30 minutes) in a given billing period

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In this billing period (May 29 – June 28), highest 30-minute interval was 1,917kW from 3:30-4:00pm a hot Wednesday in late June


Example: PSEG Office Building – on an LPL rate

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Line item Cost per kW kW June Demand Charge

PSEG Annual $3.60/kW 1,917 $6,901

PSEG Summer $8.56/kW 1,917 $16,409

Total PSEG Demand Charge: $23,310

In PSEG, like many utilities, there is an additional Summer charge (June-Sept). Utility Demand Charges change month-to-month.

But that’s just half the story…

Calculating Utility Demand

Presenter

Presentation Notes

Building 2.4 m sq. feet


Calculating GRID DemandIntroducing the Grid – PJM Interconnection

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• PJM is the world’s largest grid, covering 13 states from the Mid-Atlantic all the way down to North Carolina and over to Illinois

• PJM schedules the reliable flow of power from generators to consumers – and charges customers for the service


PJM Capacity Charges are based on a customer’s Peak Load Contribution (PLC); it is calculated based on the customer’s consumption during the five highest hours of total Grid demand (kW) during the previous year.

These are known as the 5CPs – the five Coincident Peak Hours

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Calculating GRID Demand

Presenter

Presentation Notes

Peak demand charge for year (Capacity charge)


The 5CPs almost always occur during Summer afternoons

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5CP Chart, 2009-2013

2013 2012 2011 2010 2009

July 15, 5-6pm July 5, 3-4pm June 8, 4-5pm July 6, 4-5pm Aug. 10, 4-5pm

July 16, 4-5pm July 6, 4-5pm July 19, 4-5pm July 7, 4-5pm Aug. 11, 4-5pm

July 17, 4-5pm July 16, 4-5pm July 20, 4-5pm July 23, 4-5pm Aug. 17, 4-5pm

July 18, 4-5pm July 17, 4-5pm July 21, 4-5pm Aug. 10, 4-5pm Aug. 18, 4-5pm

July 19, 2-3pm July 18, 2-3pm July 22, 2-3pm Aug. 11, 4-5pm Aug. 20, 4-5pm

Summer 2013 PJM peak load was 158 GW.



PJM Transmission Charges are based on the customer’s “Zonal PLC” – the customer’s demand (kW) during the highest five hours of the utility’s demand during the previous year.

In 2013, PSEG and PJM hours were almost identical.

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PJM Demand Charges are Ratcheted

Ratcheted: Once you set the Demand kW, it stays at that level on your bill for a full year.

Note: Some utility Demand Charges are ratcheted, but not PSEG’s

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Demand Charge Summary

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PSEG General Power Service Rate DEMANDCHARGE

SUMMER($/kW)

WINTER($/kW)

# of MONTHS

TOTAL ANNUAL

PSEG Annual $3.60 $3.60 6 $21.60

PSEG Summer $8.56 4 $34.24

PJM Capacity* $6.84 $6.84 12 $82.13

PJM Transmission* $3.98 $3.98 12 $47.80

TOTAL $22.71/kW $14.34/kW $186/kW, annually

*Ratcheted

PJM charges double the customer’s sensitivity to Demand in the Summer; and then they have to bear that cost all throughout the Winter.


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So How does Demand Effect Electricity Bills?

Usage (kWh):$396.99 $205.64$253.93$679.17$774.89-----------$2,310.63

58% of bill


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So How does Demand Effect Electricity Bills?

Demand (kW):$385.68 $715.74$362.06$209.60------------$1,673.07

42% of bill


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But this site uses off-peak cooling (ice storage)If you add back 35kW to this site, Demand increases to 52% of the bill. (about avg.)

Total bill savings are 16.5%.


Third-Party Suppliers (LSE)• Many commercial customers use a third-party supplier, like

a Hess, Direct, Constellation, etc. • Suppliers often use a blended rate – everything combined

into one per-kWh rate.

This makes it “easier” for customers, but it obscures one of the two ways they have to save money on their bills!

Is this an insurmountable problem? No. • When you consult with a client, advise them to insist that

starting with their next contract, all charges, per-kW and per-kWh, be listed out line-by-line

• Suppliers will do this, because they hate losing business.

“Ask and you shall receive.” And if you don’t receive, ask somebody else.

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Presenter

Presentation Notes

Many commercial customers use a third-party supplier, like a Hess, Direct, Constellation, etc. These suppliers often use a blended rate, where they take the various charges and combine them into one per-kWh rate. This makes it “easier” for customers, but it obscures one of the two ways they have to save money on their bills! Is this an insurmountable problem? No. When you consult with a client, advise them to demand that all charges, per-kW and per-kWh, be listed out line-by-line in their next contract. Suppliers will do this, because they hate losing business.


When Would you Fill-up?

Daytime

$ 3.25/gallon

Nighttime

$ 1.30/gallon


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Questions?

Evan Berger, Director of Energy SolutionsCALMAC Manufacturing Corp.

[email protected]


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APPENDIXor, slides that were left on the cutting floor


Conclusions4. We have a lot more transmission structure than we typically use

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20% of our T&D infrastructure (poles, wires, and substations) is used only about 200 hours a year.


Utility Load Factors* in the USA

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50

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60

65

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1955 1965 1975 1985 1995 2005 2015

Year

*Load Factor = Avg. LoadPeak Load

%

Advent of Air Conditioning


Because we blast the A/C during the day.

Our building cooling systems are designed as if no one knew the occupants were

coming!

Why have utility Load Factors been dropping for 50 years?


The Old, Regulated Market

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Grid

Owned and operated by

traditional local utility

(PSEG)


The New Deregulated Market

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Grid

Generator / Load Serving

Entity (LSE)

ISO Grid Operator

(PJM)

Wires Company

(Utility)Customers


Traditional Electricity Bill

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Customer Charge

Demand Charge

Energy Charge

Taxes / EE Programs

etc.

=

Total Amount


Deregulated Electricity Bill

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Supply Charges

Generation Grid

Demand

Transmission Grid

Demand

Energy Usage

Charges

Delivery Charges

Service Charge

Annual Demand

Summer Demand

kWh Charges

Misc. Benefits Charges

LSE (Load Serving Entity uses gridto transport energy)

Traditional utility provides delivery

Total Electricity Bill


Time Dependent Valuation of Energy

Monday Friday

A kW saved is valued the same for every hour of the day

A kW saved during a high-cost peak hour is valued more

highly than a kW saved during an off-peak hour

Flat Energy Value

Time Dependent

Energy Value

Ener

gy v

alu

e

Presenter

Presentation Notes

CALIFORNIA, and soon the rest of the country, looks at energy differently because of what we just discussed. If all energy has the same value it does not matter when the kW is saved. They all have the same value. CA values energy based upon its market value at the time consumed. So a kW saved during the peak of day is of more value than if it were saved off peak. Real time pricing and demand response programs are based upon the market value of energy when it is consumed creating revenue opportunities for customers with the ability to store energy. (LMP) Locational marginal pricing -- a system that prices electricity based on the cost of generating and delivering it. LMP allows the ISO to use a detailed model of the grid to "see" and deal with congested power lines a day ahead of time.

Business

Understanding the New Jersey electricity bill