I wanted to address a concern that has come up in several recent conversations about lowering costs. In several of my articles, I have discussed efficiency in one form or another. Managing when we use power isn’t necessarily tied to how much power is available, it is managing the price we pay for power during peak times. Purchasing power from our power supplier is our highest cost. It equates to approximately 70% of our expenses each year. Our power costs are highly affected by our load factor. You can think of load factor like keeping a car at a steady speed vs. stop-and-go-driving – steady use is more efficient and less costly. The more evenly we use electricity throughout the day, the higher our load factor is. When we sell more kilowatt hours, our fixed costs are spread over more sales, which lowers the average cost per member on purchased power. When usage is steady, we operate more efficiently as a system, which increases our load factor.
Curtailing load during peak times means that when electricity demand is very high, costs are also at their highest. Shutting down during these periods reduces the amount of high-priced power purchases during those windows, which reduces costs for all members. Does this mean members' bills will go down? No, not necessarily. But can it reduce costs and reduce the need for rate increases by operating more efficiently? Yes. Power costs go up every year, and it is difficult to increase the load factor by organic growth. Having the opportunity to add significant load at a high load factor to our system is one way of making a difference in our costs for members. If everything stays the same year after year, increases are needed to cover cost increases.
I often hear that they are telling us to conserve energy today, but they promote high usage items like electric vehicles and large loads. Electric Vehicle charging is best suited for off-peak rates during the night. Large loads that can shut down during peak times can make a big impact on stabilizing rates for everyone. Minor reductions add up when more members shift usage to lower-cost times of the day. Demand costs are set during these times, so the more we reduce, the less we pay, and it sets the demand rates for the next year at a lower level, which also helps stabilize the next year’s rates.
