AEP Rates Stun Small Businesses

Today the Dispatch posted an article about how new AEP rates have hurt small businesses. Some of them have seen increases of upwards of 45%.

This is a factor of many different influences and an increasingly complicated Ohio electricity market. Some day when we have more time we can share our perspective, but for now I want to focus on solutions for small business owners.

This rate increase is most likely a result of your load factor. A load factor is a way of comparing how much total energy you use versus the most you use at any one time.

Note: Utility tariff nerds leave me be. I'm focusing on explaining this at a level the average business owner needs to understand so detailed techical innacuracies need not be sent my way :)

On a utility bill you are charged for electricity in different ways. To make it simple I'll say that you are charged for how much you actually use and how much the utility has to keep ready that you might use. This second part is known as demand. Fior example, if at one time during a month you need 75kw of energy then the utility basically assumes that you could need that much at any time. So they have to have it available. If however that 75kw is a rare occurence and you use much less energy the rest of the time you still have to pay for the utilities need to be prepared.

That difference between your peak use and average use is known as your load factor.

There are ways to improve this. Looking at when and how you run machines in your workplace, looking at moving certain processes to off hours time, controlling your demand are all ways to improve this.

Solar energy, used correctly, can be a way to improve this.

Here is an article that goes into more details about load factor and potential solutions.

If you'd like to learn more about how you can reduce your bills please contact us and we would be glad to present solutions and see if we can help. As a small business ourself we know how unexpected cost jumps can be very painful.

Good luck to you!

Future Electricity Prices and EPA Regulation of Air Quality

One of the key variables in modelling the economics of a proposed solar project is the price of electricity in future years.  Our baseline economic model includes an assumption about electric price escalation that is based on historic data.

However, we also point out that we believe our assumption includes a conservatism based on the potential for electric price increases resulting from things like climate change and air quality regulations.

As usual, the tone of the debate in Washington over the potential impacts of rules under considertion by the Environmental Protection Agency is full of hyperbole.  On one hand, the industry argues that EPA's proposed regulations will result in dramatically higher prices as coal plants are forced to close.  On the other hand, enviros argue that cost is not a consideration.

With this in mind, I appreciate thoughtful, balanced analysis of issues like this.  Congressional Research Service to the rescue.  As pointed out by Ezra Klein in the Washington Post:

[T]the CRS report says, although the transition won’t be simple. For one, most of these plants don’t provide as much baseload power as it appears on first glance—pre-1970 coal plants operating without emissions controls are in use, on average, only about 41 percent of the time. Second, the report notes that “there is a substantial amount of excess generation capacity at present,” caused by the recession and the boom in natural gas plants. Many of those plants can pitch in to satisfy peak demand. Third, electric utilities can add capacity fairly quickly if needed — from 2000 to 2003, utilities added more than 200 gigawatts of new capacity, far, far more than the amount that will be lost between now and 2017.

The Washington Post blog post by Ezra Klein summarizes the CRS report nicely.

Overall, we are comfortable with the future price assumptions we make in modelling projects for our customers.  But we are also aware that we might be underestimating the risk of price increases over and above the historical rates.