Business Electricity Customers Benefit from Critical Peak Pricing
In the current economic climate, many businesses are attempting to improve their financial situation by reducing costs. One of the large costs for companies, particularly with large manufacturing operations, is for electricity. Electricity powers offices, retail spaces, factories, and many other aspects of business, so many companies would benefit from finding the cheapest electricity possible. What can be done to reduce electricity costs?
One solution is to take advantage of the many demand response programs that utilities are beginning to implement. Utilities are particularly concerned with reducing demand at times when it is greatest, because it is the peak demand that determines that amount of electricity generation capacity that they need to have on their system. If they do not have enough capacity, they may be forced to pay exorbitant prices to buy electricity from other providers on the wholesale market during periods of peak demand.
One demand response program that some utilities make available to business electricity customers is called critical peak pricing. In such a program, the customer agrees to pay an extremely high price for electricity during a limited number of designated critical peak periods during the year; for example, these may be limited to 12 6-hour periods during the year. In return, the customer receives lower electricity rates at other times. This can be particularly beneficial to a business if it is capable of significantly reducing its electricity usage during these few critical peak periods. These usually occur during the summer, when there is increased electricity demand due to the heavy use of air conditioning. The critical peak periods are typically announced a day ahead, so, if a company can suspend its operations with that amount of advance warning, they can benefit from participating in such a program.
Note that demand response programs are often only available to large business electricity customers. For example, Southern California Edison limits participation in its critical peak pricing program to business customers with demands over 200 kW. If your business qualifies, you may want to take advantage of such a program in order to get cheaper electricity.