Utility Bill Triage & Standby Rates

Matt Arisohn, Zondits guest, 4/25/2023

Matt Arisohn is the President at Next Energy World, LLC where he works with commercial customers to obtain higher energy efficiency levels, install clean energy systems, and reduce costs. This article has been edited from a blog entry posted by Matt, https://new-sustainability.com/f/utility-bill-triage-standby-rates.

During this past winter, electric and natural gas customers throughout the Northeast experienced rate increases ranging from approximately 20% to over 50%. Propane and oil prices saw similar increases. One result has been increased customer inquiries regarding what they can do to save on their utility bills. While the typical approach is to conduct an energy audit, some wanted a crash course in bill triage. A few customers had large monthly charges that were forensically explainable, like theft via an extension cord to an exterior outlet. Whereas others firmly believed that their meter readings were wrong, which is unlikely, but it does happen. Just this year, one customer had charges over $1.00/kWh, while another customer mysteriously was not being charged the right gas multiplier (to the tune of 20,00 Therms/year in unreported consumption), and finally, another new business customer had been operating for over a year without receiving any bills. While these are extremes, most customers simply want to understand their billing rates and options available for reducing costs.

Electric utilities throughout the Northeast also want customers to reduce their demand impacts on the grid, regardless of customer size. There are numerous demand response programs that pay incentives for customers investing in generators, microturbines, combined heat and power, and battery storage systems. Customers receive financial incentives for discharging or deploying their assets when the utility calls for peak power reduction. Historically this has been during hot summer periods, but with the growing use of heat pumps for space and water heating, winter peaks are now becoming an issue.  

In New York State and elsewhere, standby rate classes may be the answer. These rates were historically used for generating plants and other customers who adopted renewable technologies. Now, in New York, any customer (residential and businesses) can go on a standby rate class. Like with current high-volume customers, standby rate customers will no longer have their utilities procure energy on their behalf as indicated in annual proposals that are likely to be approved in NY by the Department of Public Service (DPS) as soon as July 1, 2023. The utilities will place standby customer supply services on the real-time market, which is regulated and posted every 5 minutes by the New York Independent System Operator (NYISO). It is based on the capacity of available generating assets compared to demand and complicated by weather conditions including storms and extreme temperatures. It can be presumed that utilities do a good job of procuring energy to meet demand except for the few times a year when weather is unpredictable.

Standby rates are designed to be revenue neutral for delivery services, but with fluctuations in the real-time market, customers may see large bills when electrical demand is high and available assets are not available or are expensive. That may leave you with the question as to why bother. The standby structure completely changes the way you understand energy delivery. Unlike a time-of-use rate structure, which has higher rates in peak hours, and lower rates in non-peak hours such as overnight, the standby rate is solely based on demand. A negotiated demand structure is how the utility will deliver electricity to these customers, typically on a 15-minute rolling peak period (which for existing commercial demand customers has not changed). Peak periods are stipulated by your utility over different seasons, days, and even hours. Your charges will include that negotiated peak demand value as a fixed charge per month, called your contract rate, and then during peak days, your peak consumption during the peak hourly window will be your daily charge. So, for those who can reduce peak demand, or shift their consumption to off-peak times, then they will save money on their delivery bills.

There are many ways to reduce your peak demand. Software programs and/or dedicated devices can permit equipment to operate at night. For example, timers for water heaters and EV chargers can be programmed to turn on at night only. This doesn’t change consumption but will shift load to a time period with a lower rate and/or lower the customer’s peak demand. Smart electrical service panels can also be programmed to limit demand consumption during the day. For example, HVAC equipment such as heat pumps that can operate at low loads more efficiently than typical equipment will benefit from this rate. Smart panels can also enable pre-cooling and/or pre-heating, changing thermostat setpoints, or staging equipment to reduce peak demand.

To reduce the impact of the real-time market fluctuations in extreme events, New York ratepayers have the option of selecting their electric supplier from more than 200 independent suppliers while keeping their utility company connection. Although the rates will vary somewhat, both demand and energy savings will be obtained through the installation of renewable energy systems such as PV solar with battery storage that allows the shifting of loads. Another option is participation in “community” solar projects which allow customers to purchase solar-generated electricity without an installation at their home, apartment, or business. As the community solar trend grows, more projects will incorporate battery storage to better regulate power supply periods.

As with most of life, knowledgeable customers will be able to control costs under new and upcoming rate structures. Those not paying close attention, and/or not seeking advice, will likely pay more than their fair share. As more customers switch to standby rates and reduce their grid connect burden, it is possible that the standard rate classes will have to pay more for the utility to maintain the status quo. Savings begets savings.