4 Solutions for Mitigating Capacity Charges

Our last blog illustrated the significance of capacity charges on the overall cost of a customer’s energy supply. When rendering figures for a customer’s capacity charge, the utility calculates what is called the Peak Load Contribution (or PLC), which is a number used to show how much generation could be needed for the system’s peak load. A customer’s average peak demand is determined by the five highest-demand days of the year and although these days cannot be predicted from year to year, they usually occur on weekday afternoons during the summer months. It is important to keep in mind that the utility will use the customer’s energy consumption on these five days as the basis to calculate their average PLC. This value is then fixed for a set period of time which varies by ISO, and unlike other charges associated with the overall energy cost, capacity does not change as the load and demand changes. However, this amount can increase or decrease the following term based on the customers calculated PLC. Therefore, you have the chance to make some changes and do your best to decrease your PLC, in turn decreasing your overall capacity and energy charges.

Reducing peak demand can be accomplished in a variety of ways; dimming lighting or upgrading to more efficient fixtures, shutting down or downsizing equipment, scheduling operations during non-peak hours, and using onsite power generators and/or participating in demand response programs.

Install More Efficient Equipment – Dimming or completely turning off lighting is one obvious way of reducing demand. However, replacing an old or outdated lighting system and fixtures can help significantly reduce energy consumption as well.

Downsize Equipment – Oversized equipment such as air-conditioning units can cause higher charges by demanding more electricity when they operate.  Even though a unit that is a more suitable size may operate for a longer period of time, the amount of electricity it demands will be less.

Reschedule Loads – If possible, perform operations that are energy intensive when demand is low such as at night or early in the morning instead of during the day.

Participate in Demand Response Programs– As outlined more in depth in a previous blog post, participants are offered incentives for their involvement in demand response programs where they are asked to reduce or shut off portions of their power, or use a generator, at specific times when it is forecasted that there will be a high demand for electricity that may affect the grid or there is a predicted emergency.

Think about it like this: if you were billed just for consumption, you would have no incentive to reduce your peak demand.  By trying to accomplish some of the suggestions above, you can work to reduce your demand charges and thus your increase in capacity charges in the forthcoming years.

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