If you’re a California business, your electric bill is about to change in a major way. Investor-owned utilities (IOUs) like Southern California Edison and Pacific Gas and Electric are applying a new rate schedule to businesses beginning January, 1 2014. Currently, many business owners pay a seasonal flat rate for each kWh used. IOUs set your rate based on your maximum demand over the previous twelve billing cycles and other factors related to your energy usage. The total on your bill total is determined by your rate, total kWh used, demand, taxes, and fees – for now. This simple math is about to get a little more complicated with new Time-Of-Use (TOU) rates.
Time-Of-Use rates vary based on when energy is used. There are three pricing tiers, peak, mid-peak, and off-peak, and two seasonal schedules, winter and summer. The California Public Utility Commission has mandated that IOUs adopt this pricing structure to more accurately reflect the real cost of delivering electricity. When demand on the electrical grid is the greatest, the cost of delivering electricity is far higher than during low demand periods. Take for example a hot summer afternoon when air conditioning units are on full-blast; the grid quickly becomes maxed out and IOUs have to fire up inefficient, expensive auxiliary stations to keep up with demand. When the demand is overwhelming we have blackouts, costing businesses millions in lost productivity and product.
Why the change to TOU rates? First, utilities hope that a financial disincentive for on-peak electricity use will shift demand to mid and off-peak times. This shift helps utilities manage the grid more effectively and helps business owners by making the grid more reliable. Business owners who are mindful of their consumption will be able to reduce their bills by shifting their on-peak usage to other hours of the day. Another strategy for businesses looking to save money is to shift certain tasks to off peak hours. For example, a business that creates computer models could run their energy-intensive rendering processes at night. Or large printing jobs could be saved until after normal business hours. If you look closely, you’ll likely find several tasks that could be rescheduled to take advantage of cheap off-peak electricity.
Most importantly, TOU pricing is another great reason to go solar! The IOU’s expensive, on-peak hours are the same hours your solar system is at peak production. You avoid paying the highest rates by taking electricity from solar rather than the grid. As solar deployment expands on-peak demand decreases, simultaneously lowering prices and increasing grid stability. For more information on TOU rates and what it means for your business, contact your utility or check out SCE’s informational video here.