Electricity is an inevitable expense for any business, but consumption isn’t the only thing that impacts your bill. In today’s energy market, the consumer has more agency than ever when it comes to power production and, in turn, what is spent on it. In order to take advantage of cost-cutting and revenue-generating energy programs, understanding what goes into your electric bill is crucial.
Supply vs. Delivery
If you look at your latest electric bill, you’ll notice the charges separated into Supply and Delivery. Put simply, the supply charge accounts for the energy you use during a billing cycle, and the costs associated with the transfer of that energy from the plant to your business make up the delivery charges. But of course, there’s more to it than that.
To save on your energy supply charge, just use less electricity, right? Sure, that will lower your usage but it’s not necessarily the best way to create savings. Not only is it not always feasible to decrease usage when running a business, but that same expended energy could be costing your neighbor less. Locking in the lowest rate by choosing the right supplier will have a bigger impact on your monthly bill.
Supply rates are either fixed or variable. With fixed rates, the cost per kWh remains the same every month. Variable rates fluctuate with the market. But who determines these rates? How can you trust that your rate is fair? How do you find the supplier with the right rates? As with any investment, consulting an expert advisor is a good starting place to understand your options. Energy advisors, like Gridwealth, take the pain out of energy decisions with their technical and regulatory knowledge, transparency, and industry connections.
Distribution, transmission, and transition charges all relate to services performed by a utility, like Eversource, to power your building. However, you may notice Renewable Energy and Energy Efficiency charges listed under delivery as well. In Massachusetts, public policy initiatives make up about 20% of the typical bill. Those additional delivery charges go towards the development of renewable energy in the Commonwealth.
Demand and Capacity
While supply represents your total energy usage, demand accounts for the stress those hours put on the grid at a given time. Peak hours, or the hours consumers collectively demand the most electricity, are billed as demand charges. The rate at which you are charged for demand is determined by your usage on the highest electricity usage day of the year. So, the amount of electricity you use during the hottest weekday of the year, for example, will determine your demand charge for the next year.
Peak demand also affects capacity, or the estimated use of energy based on both your actual consumption and the amount of energy necessary to meet your peak demand. As consumers, we expect electricity to always be available. In order to meet those expectations, power generators need to produce enough electricity to the grid to meet peak demand even if you don’t use it. While at first it might seem like you’re being charged for electricity you’re not using, it’s important to remember that grid reliability and resiliency can be costly.
Community Shared Solar Credits
Unlike the renewable energy policies ratepayers are charged for, Community Shared Solar (CSS) credits actually save consumers 10-15% every month. Here’s how it works: ratepayers are eligible to subscribe to a local solar farm that produces renewable energy to the grid. By supporting local, clean energy subscribers receive a discount on their energy bills every month — with no upfront costs. It’s a win-win; subscribers save money on their electric bills and reduce their carbon footprint while their entire community benefits from cleaner power and a boosted economy.
With competitive energy suppliers, renewable energy incentives, and the right energy advisor, shrinking your electric bill has never been easier. To find out how you can start saving on your electric bill, contact Gridwealth.