What are Peak Demand Charges?

As most business owners know, the monthly energy bills that come in the mail are often some of the most expensive parts of owning and running a company. Utility bills can quickly add up and cost any small business owner a great deal of money. Most energy bills are split into two separate charges kW, or demand charges and kWh usage charges. These peak demand charges are often listed as TOU Pricing on the document or Time of Use Pricing.

The demand charges, also known as peak demand charges, can make up a great deal of your business? monthly energy costs, which is why it is important for small businesses to not only understand these fees but how to avoid the extra costs that make up peak demand charges.

What is Time of Use Pricing?

Understanding these peak demand charges begins with understanding energy deregulation. Before deregulation was implemented in the late 1990s, electric utilities in the United States charged customers the same flat rate for standard energy use, no matter what time of day they were using the energy. When deregulation changed the market, the state-appointed utilities launched ?Time of Use Pricing? (TOU).

During certain times of the day, when more consumers tend to use energy, the electricity company charges a higher amount energy usage. This time is known as ?peak? energy usage, but there are also ?partial-peak? or ?intermediate-peak? times of use, as well as ?off-peak? usage, when energy is the most affordable.

Time of Use Pricing, can typically be broken down into three different time periods and they can vary from one utility to the next.

Peak Hours

Peak hours also known as ?on-peak? hours are when electricity demand is the highest, you pay the highest amount per kWh. In the summer, these hours are typically from 10:00 am- 8:00 pm during weekdays. In the winter, these peak hours are typically around 7:00 am to 11:00 am and 5:00 am to 9:00 pm.

Mid-Peak

Mid-peak, also known as intermediate peak is when the demand for electricity is relatively average. This time can vary but typically during the summer, it is weekdays between 7:00 am and 10:00 am and 8:00 pm and 11:00 pm. In the winter, these mid-peak hours are typically from 11:00 am to 5:00 pm.

Off-Peak

Off-peak hours are the best time to use energy, and are typically when energy consumption rates are the lowest. During this time, pricing is often lower than the basic service price. In the summer, this time is typically between 11:00 pm and 7:00 am. During the winter, these hours are typically from 9:00 pm to 7:00 am as well as Saturdays, Sundays and major holidays.

Your utility should be able to provide you with specifics regarding what hours are peak, mid-peak and off-peak hours, but remember the times not only differ but they differ between the summer (typically starts on May 1st) and the winter (typically starting as November 1st).

If you understand ?Time of Use? pricing then you can easily lower the cost of your monthly energy bill, by making an effort to use less energy during peak hours, and attempting to use energy more during ?off-peak? or ?partial-peak? hours.

Start by finding out what the exact peak, mid-peak and off-peak hours are for your service area and try your best to avoid using energy, when it is not absolutely necessary. This can be difficult for small business owners as there is no way to change your business hours, but there are still tips to consider when it comes to lessening your use during these times.

Everyday Tips for Reducing Peak Energy Use

There are things you can do every day to start reducing how much energy your business uses during peak energy times.

– Do laundry and wash dishes on the weekends. If your business requires you to run appliances such as dish washers and washing machines, doing these errands on the weekend can help reduce your energy consumption costs. If you have copies to make or extra work to do, consider doing these things on the weekends as well.

– Unplug electronics when not in use. Unplug your printers, scanners, copiers, microwaves and coffee machines during the day when they are not in use. It takes only a minute to plug these electronics back in and start using them. When they are not plugged in, they don?t use energy, and chances are you won?t need your copier on during every minute of the day. At first, it may seem like a nuisance, but you and your team will get used to it over time.

– Put the hibernation feature on your computers. Most businesses need to keep computers on during peak energy use times, as these are also peak business times. However, you can set hibernation features on your computer, so that your computer uses less energy when you are not physically using it. This means if you need to step away from your computer for a few minutes at a time, you can actually spend less on electricity during the day.

– Allow telecommuting. If your business allows for it, set up a scheduled for employees to work from home when they want. This can help you use far less energy on a daily basis. Even an individual employee working can contribute to a great deal in lighting, cooling and electricity use.

– Keep your thermostats set. Turn your thermostat up two degrees in the summer and down two degrees in the winter. Your employees and patrons will barely be able to notice the difference. Most importantly, make sure that no one in the office is able to manipulate these temperatures. Employees messing with the thermostat can lead to a great deal in energy costs.

– Install motion sensors. There is no real way to prevent employees from using lights during peak energy times. Peak energy times and peak business times, are unfortunately often the same. However, if you install motion sensors in your office that turn lights off when employees leave the room, you can save a great deal in energy costs. Something as simple as having the lights on in the bathroom all day during peak hours can cost your company a great deal of money.

Demand charges can make up a large portion of your business? monthly utility costs, even as much as 50 percent of your electricity bill. Being conscious of these charges and making a concerted effort to lessen your energy use during this time can only help reduce your company?s electricity costs and total overhead.