MANAGING YOUR ELECTRICITY COSTS: a guide for business

Transcription

1 MANAGING YOUR ELECTRICITY COSTS: a guide for business

2 FIVE KEYS TO MANAGING ELECTRICITY COSTS By understanding how and when your facility uses electricity, you will be able to discover opportunities to cut costs and boost profits. You will also be able to tell your customers and community that your business is using electricity wisely. The IESO is a non-profit organization that manages the reliability of Ontario s power system and operates the wholesale electricity market. Every five minutes, the IESO forecasts electricity demand throughout the province and collects the best offers from generators and dispatchable consumers to provide the required amount of electricity. The electricity market allows customers to see the price fluctuate based on supply and demand. As a result, they can shift electricity use away from peaks to times when the price is lower. The IESO works with customers paying the market price by creating educational material on the electricity market to help them manage their bottom line electricity costs. For more information, visit

3 1 UNDERSTAND HOW YOU RE BILLED pg 2 2 KNOW WHERE YOU STAND TODAY pg 6 3 INVEST IN AN ENERGY MANAGE- MENT PLAN pg 8 Businesses that use over 250,000 kilowatt-hours of electricity per year (or at least $2,000 per month in electricity costs) pay the market price for electricity rather than the time-of-use prices that households, small businesses and designated consumers such as farms pay. As a business that pays market prices for electricity, your costs are based on: How much you use Your peak demand The time of day and week you use it if you have an interval meter Cost-saving opportunities will become clear by finding answers to these questions: How much electricity are you using? What s the pattern of your usage is it higher at certain times of the day or month? An energy management plan can boost your bottom line over the short and long term. Setting goals for more efficient usage can significantly reduce your costs. 4 CONTROL YOUR ELECTRICITY USE pg 10 5 CASH IN ON INCENTIVES pg 16 Making changes to your operations or equipment can yield significant savings. Not all energy-saving ideas require capital investments: Know the factors that affect the electricity price Manage and reduce your total energy use and your peak demand Learn how to work with your local utility, the Ontario Power Authority and your natural gas supplier to make the most of the available financial incentives for businesses that take steps to conserve electricity or change the way they use electricity. A Guide for Business 1

4 1 UNDERSTAND HOW YOU RE BILLED Understanding how you re billed for electricity is the first step to reducing your electricity costs. A. ENERGY CHARGES (kwh) BASIC TERMS (UNITS): Kilowatt-hours (kwh) Electricity: This is the cost of the electricity supplied to you measured in kilowatt-hours (kwh). It is the part of the bill that is subject to competition. This means you can buy it through your local utility (Standard Supply Service) or choose a retailer licensed by the Ontario Energy Board. Line Loss: When electricity is delivered along distribution lines, not all of it reaches its destination. For example, when electricity moves along the wires, some of it is lost as heat it s simply a function of the physics of how electricity moves. Utilities use a loss factor to adjust the electricity consumption upward so that you pay the full amount of what it costs to supply your electricity. This difference is typically shown on bills as metered usage and billed usage. Global Adjustment: This accounts for the difference between the market price and the rates paid to regulated and contracted generators as well as conservation and demand management programs. Regulatory (Wholesale Market Services): This rate provides for the reliable management of the power system and the wholesale electricity market. It is approved by the Ontario Energy Board (OEB). Debt Retirement: This charge of 0.7 /kwh is set by the Ontario Ministry of Finance to pay down the residual stranded debt of the former Ontario Hydro. Electricity/Commodity Charge Global Adjustment Wholesale Market Services Debt Retirement SSS Administration Customer Charge* Standard Supply Service (SSS) Administration: This $0.25 charge per month covers a portion of administrative costs that your utility incurs. Customer Charge*: This fixed monthly charge covers your utility s administrative costs such as meter reading, billing and customer service. Note: your electricity bill may or may not reflect all the charges outlined here sometimes charges may be bundled. 2 Managing Your Electricity Costs

5 Although each utility in Ontario uses a slightly different bill format and terminology for its customers, two basic principles are common to all. Your electricity costs are based on: A. TOTAL CONSUMPTION How much electricity you consume, measured in kilowatt hours (kwh). B. PEAK DEMAND How quickly you draw it from the system, measured in either kilowatts (kw) or kilovolt-amperes (kva). B. DEMAND CHARGES (kw or kva) BASIC TERMS (UNITS): Kilowatts (kw) Delivery-Distribution* Delivery-Transmission* Transmission Connection Transmission Network Transformer Credit Power Factor Distribution*: This rate, regulated by the OEB, covers the cost of delivering electricity from the transmission system to your business. The charges go to your local utility to build and maintain the distribution lines, towers and poles. Transmission*: These regulated charges are required to cover the capital and operating costs of Ontario s high-voltage electricity grid. These costs are submitted by transmitters (e.g. Hydro One) to the OEB for regulatory approval. They include two components: Transmission Connection: Your utility is connected to the transmission system and the electricity has to be transformed to lower voltages before your business can use it. This charge covers the cost of doing this. Transmission Network: This covers the cost of operating and maintaining the towers, wires and other equipment used to deliver electricity from where it s generated to your local utility. Transformer Credit: Customers who own and maintain their own transformers that connect them to the power grid receive this credit. The rate is based on peak demand, and is typically set at $0.60/kW. Power Factor: Power factor does not typically appear as a line item on your bill unless your facility has low power factor which can result in higher distribution and transmission charges. Distribution and transmission charges are often billed on either the metered kw or 90% of the metered kva, whichever is greater. A number of industries have found that correcting power factor can provide one of the fastest paybacks when making investments to reduce electricity costs. Your local utility can tell you if you re paying a penalty for power factor. TALK TO YOUR UTILITY If you have questions about how your bill is calculated or don t understand the cost breakdown, talk to your local utility. They can explain your demand and energy charges and confirm whether you re paying the market price for electricity. A Guide for Business 3

6 1 UNDERSTAND HOW YOU RE BILLED (CONTINUED) Understanding Global Adjustment The Global Adjustment provides both adequate generating capacity and clean energy for Ontario. It accounts for the difference between the market price and the rates paid to regulated and contracted generators and for conservation and demand management programs. It covers the cost of building new plants, paying regulated rates to nuclear and hydroelectric baseload generators and greening the power system through conservation, demand response and cleaner generation. For most customers, Global Adjustment (GA) is charged on your total electricity use (kwh). The monthly rate varies depending on factors in the electricity market that shift the energy price higher or lower. A higher average monthly price exerts a downward pressure on money that needs to be recovered through GA which is illustrated in the chart on page 5. Your utility charges one of three monthly rates for Global Adjustment depending on when you are billed. Each rate is set to recover the total monthly costs for GA. All the rates are posted to GA for large consumers Customers with a monthly peak demand over five megawatts (MW) are designated as Class A consumers. A determination of Class A consumers is made by taking your peak demand for each month in the base period (see table on the right) and determining if the average of those peaks is over 5 MW. For example, if a Class A consumer is assessed to be responsible for one per cent of Ontario s peak demand for the five highest hours of the base period they will be charged for one per cent of the total Global Adjustment costs through the subsequent billing period. Class A consumers receive an annual notification from their utility with their percentage of peak demand, called the peak demand factor. Current peak demands and forecast demand information is available at Evaluate a retail contract If you sign a retail contract it only applies to the commodity portion of your bill (the market price). All other charges on your bill, including Global Adjustment will continue to apply. For low-volume consumers paying the Regulated Price Plan (RPP), Global Adjustment is factored into the RPP rate. If you sign a retail contract, you will see two line items on your bill: one for the price agreed to under the contract and a separate line for the Global Adjustment. If you are considering a retail contract, understand your demand profile so that you can weigh the most cost-effective option and determine whether to contract for all or part of your load. Also, make sure to compare historical market prices against the contract price and account for the Global Adjustment. Ask questions and compare offers before signing a contract. For a detailed list of questions to ask, visit TIMELINES FOR THE BASE PERIOD AND THE BILLING PERIOD Real-time information on when Ontario electricity demand is at its highest is available at: BASE PERIOD Peak-setting period ADJUSTMENT PERIOD Billing period May 1, 2011 to July 1, 2012 to April 30, 2012 June 30, 2013 May 1, 2012 to July 1, 2013 to April 30, 2013 June 30, 2014 May 1, (Year X) to April 30, (Year X+1) July 1, (Year X+1) to June 30, (Year X+2) 4 Managing Your Electricity Costs

7 Controlling our energy costs is important: when we see a high hourly electricity price, we send a notification to all of our facilities to curtail consumption. Alex Savu, Energy Manager, CFB Borden AVERAGE ELECTRICITY PRICES PLUS GLOBAL ADJUSTMENT The market price of electricity plus Global Adjustment forms the commodity portion of your bill Average Ontario Energy Price Global Adjustment A Guide for Business 5

8 2 KNOW WHERE YOU STAND TODAY Understanding how much energy you use and when you use it can reveal cost-saving opportunities. Interval meters track usage hourly For market rate customers, interval meters are the only way to take advantage of fluctuations in price. Interval meters track how much electricity you use on an hourly basis or in some cases, 15 minutes. Having an interval meter means your utility charges the Hourly Ontario Energy Price (HOEP) for electricity based on your usage for each hour. Businesses without interval meters pay a weighted average of the hourly price which is based on the consumption patterns of similar consumers in your area, rather than just your own. If your electricity use is fairly consistent 24 hours a day, or if you use more electricity during off-peak hours, it s likely you can reduce your costs by installing an interval meter. Your local utility or an energy consultant can help you determine whether it may be advantageous to purchase one. Get the details on your demand Demand profiles are like a fingerprint, which details the characteristics of your company s electricity use over time. They are important tools to help understand your company s electricity use patterns and how to manage them more effectively. By looking at your demand profile, you will see what times of day you use electricity, how much you use and when your peak demand occurs each month. Understanding when your business sets a demand peak can help determine which equipment or processes could be shifted in order to lower demand charges this could comprise up to 30 per cent of your total bill. You can also determine whether there are ways to avoid using electricity at the most expensive times of the day. Your local utility or an energy consultant can provide you with data and information to create, view and use your demand profile. 6 Managing Your Electricity Costs

9 Energy management starts with understanding how and when you currently use electricity. Then you can find ways to reduce it. Dipal Patel, Energy Manager, CBRE Limited AVERAGE HOURLY COST TO USE 1 MW OF ELECTRICITY IN 2012 This example compares the cost of consuming 1 MW during the three eight-hour shifts. $90 $80 $70 $60 $50 8am 4pm 12am A Guide for Business 7

10 3 INVEST IN AN ENERGY MANAGEMENT PLAN Having an energy management plan helps you to identify goals and systematically work to achieve them. Understanding your business s technical systems and how your employees operates them are two of the keys to identifying opportunities to use electricity wisely and reduce your electricity costs. Outlining this information in an official plan helps your employees understand what changes need to be made and why. It also helps you track your progress, cost savings and payback on investments in energy efficiency over time. The following eight steps provide a simple, systematic approach to understanding how your business uses electricity, what influences costs, how you can use less and how to chart your success. Step 1: Understand your Energy Costs Knowing the factors on your bill that influence your demand (kw or kva) and energy (kwh) costs provide insight to the steps you can take to reduce those costs. Step 2: Monitor and Target Comparing monthly data can help you determine how energy consumption at your facility varies over time. For example, comparing energy consumption against production can help you determine energy costs per unit of production as a means of assessing potential savings opportunities. Step 3: Understand When Energy is Used The cost of electricity is influenced by when it s consumed. Your company s demand profile shows your energy use patterns information which is essential if you re considering changes to lower demand, or, if you have an interval meter, to take advantage of times of day or month when electricity prices are lower. Step 4: Understand Where Energy is Used Identify equipment that draws the most power. If you improve its efficiency, you will see a bigger reduction in your electricity costs. An energy audit provides a useful, detailed breakdown of how much electricity is consumed in your facility and where. 8 Managing Your Electricity Costs

11 Step 5: Eliminate Waste Energy waste can appear in many forms including excess time, volume, pressure and temperature. In order to realize energy savings opportunities, it s important to match the energy your business actually uses to what is really needed. Once these requirements are established, eliminating waste becomes an effective cost-savings tool. Step 6: Maximize Efficiency The condition of your company s equipment and operating conditions can have a significant impact on potential energy savings. Consider changing the way you operate, maintain existing equipment, or investing in more energy-efficient technology. While some operational changes can have relatively low or no implementation costs, investments in equipment upgrades or retrofits may have a shorter payback period than you would think and can lead to permanent long-term savings. Step 7: Optimize the Energy Supply Once you have reduced your requirement for energy, you may consider supply-side alternatives to meet your energy needs such as heat recovery, cogeneration and renewable generation options like wind, solar or biofuels. Step 8: Monitor your progress, share the results Charting your progress over time helps you share these successes with staff and encourage them to keep looking for ways to lower electricity costs. Consider creating an operational schedule and maintenance plan that takes advantage of opportunities to reduce electricity costs. By analyzing the energy use of all our buildings, we can identify opportunities to decrease our energy consumption, which in turn decreases our overall carbon footprint. John Lucic, National Director of Energy Management, Revera Inc. A Guide for Business 9

12 4 CONTROL YOUR ELECTRICITY USE Making decisions on potential energy savings initiatives is easier when you combine your demand profile with electricity pricing trends. Understanding how electricity prices vary can help you manage electricity costs. Simply put, if you have an interval meter, using less electricity at times when the price is high can cut costs considerably. Factors that affect the electricity price What influences fluctuations in electricity prices? Electricity acts like any other commodity where price depends on supply and demand but unlike material goods electricity cannot be stored. When demand for electricity is high, more generation is needed. This often drives up the cost of power. Weather plays a big factor in electricity demand. Think about hot summer afternoons when chillers are running full tilt, and industrial production is at its peak. In Ontario each degree over 16 degrees Celsius creates an additional 280 MW of electricity demand, which is like adding a city the size of Burlington to the grid. Prices tend to be lower overnight and on weekends when power demand is typically lower. Conversely, the price of electricity can peak in the late afternoon or early evening as people arrive home from work. Supply is determined by how much generators can produce. Certain power sources are more expensive to run than others. These higher-cost generators only run when demand is high relative to available supply. Hourly price trends For most of the year, electricity prices tend to be higher in the afternoon, particularly between 4:00 p.m. and 7:00 p.m. Prices are usually lowest on weekends and overnight, between 11 p.m. and 7 a.m. If you have an interval meter, shifting operations to cheaper times of the day, or testing back-up generation during high-priced times, will save money. Running operations overnight can reduce your commodity costs by more than 20 per cent. 10 Managing Your Electricity Costs

13 The Region continues to track our energy usage and compare it to market prices. Since 2006, the Region has saved $21 million from our total energy budget. Steve Hall, Director of Corporate Energy, Region of Peel Tracking weather can help to lower costs One of the most important factors affecting electricity prices is weather. Ontario sees its highest electricity demands in the summer because of air conditioning use, especially during periods of high temperatures and humidity. The chart below shows electricity demand during the highest peak day of From noon until 8pm, Ontario used more than 24,000 megawatts (MW) of electricity. The electricity price during that time was 13.2 cents/kwh. That s almost four times higher than the average electricity price in July. Tracking weather patterns and using electricity wisely during those times can save you money. In winter months, electricity patterns change. More lighting is required because of shorter days, so electricity use is noticeably higher after the sun sets. Hourly electricity demand is tracked and forecasted throughout the day at For business customers paying the hourly price of electricity, it is important to recognize potential impacts on price when demand is high. When electricity demand exceeds the forecast, it can also push prices upward as more generation is required to meet higher levels of demand. ELECTRICITY DEMAND IN JULY 2012 July 17: Humidex 45 C July Weekdays: Avg Temp 24 C MW :00am 5:00am 9:00am 1:00pm 5:00pm 9:00pm A Guide for Business 11

14 4 CONTROL YOUR ELECTRICITY USE (CONTINUED) Reduce your peak demand You can use the same amount of energy overall and still reduce your electricity bill. How? All you need to do is manage your business s electricity demand and draw the same amount of electricity from the system at a slower rate. Demand charges cover the cost of the size and type of wires and equipment needed to get the electricity to your business. Drawing a lot of electricity at one time creates a higher demand. Higher demand requires additional wires and transformers that can supply electricity at the rate you draw it without overloading. So, the higher your monthly peak demand, the higher your bill. Your electricity delivery charges for the month are based on one 15-minute or 60-minute peak. If you can reduce your peak, you will also reduce your delivery charges. Your local utility has conservation and demand management programs to assist in reducing or shifting the peak demand of your facility. Contact your local utility for more information. MAKE OPERATIONAL CHANGES AND SAVE THREE WAYS: USE ELECTRICITY WHEN PRICES ARE LOWER, REDUCE YOUR PEAK DEMAND, AND USE LESS ELECTRICITY OVERALL. Conserve and eliminate waste You might be surprised to discover that making changes to use less electricity or using electricity wisely won t cost you much or anything at all, and can lead to considerable savings. Regular equipment maintenance or turning off equipment not in use won t cost much but can shave up to five per cent off your electricity bill. For example, a grocery store in Burlington took a closer look at how it used electricity. When they examined the store s demand they noticed that overnight electricity use dipped much lower on weekends. They realized that employees were turning off fewer lights during the week than on weekends. Changing the closing procedures on weekdays was easy and free, and the electricity savings added up. A DEMAND PROFILE CAN POINT TO SAVINGS OPPORTUNITIES More savings were obvious once the electricity use profile showed that more lights were being turned off on weekend nights than on weekdays. kwh M T W T F S S 12 Managing Your Electricity Costs

15 YOUR PEAK DEMAND DETERMINES YOUR DELIVERY CHARGES FOR THE MONTH Seeing when your peak demand occurs will give you an opportunity to see what equipment or processes you can reduce. kw Mon Tue Wed Thu Fri Putting Energy Management on Permanent Display at the AGO In November 2008, the Art Gallery of Ontario (AGO) completed a four-year construction project that added approximately 100,000 square feet of gallery space to its existing 486,000-square-foot floor plan. The design of the new gallery space had distinct architectural characteristics that needed to be integrated into the gallery s operations. Gary Bridgens, the Deputy Director of Projects and Operations, met these challenges head on with a plan to reduce energy by changing the way in which the gallery s heating and cooling systems worked. The plan was achieved through a combination of consumption reduction and pricing strategies. It saved the gallery over half a million dollars in electricity costs during the first year of implementation. Part of their plan investigates the potential of LED and other efficient lighting technologies. It s a process that didn t start overnight. Since 2003, Mike Peroff, Manager of Plant Operations, has created a lighting inventory which tracks the wattage and type of the thousands of lights within the Gallery and the hours that they are on. The rate of return is king, Peroff notes. We need to show that a lighting project will guarantee results before we start. Last year, their lighting retrofits saved over 38,000 kwh of electricity which helped the AGO qualify for an incentive payment through the gallery s local distribution company, Toronto Hydro. The plan includes upgrading technology and revising operational processes in tandem. Peroff notes that to get capital funding for energy management initiatives, we need to build credibility through results. Bridgens adds, It s also credibility in terms of our most important stakeholder: the gallery patrons. Energy management is not only about reducing our consumption, but about ensuring that our patrons have a great experience at the AGO. Read the full case study at: A Guide for Business 13

16 4 CONTROL YOUR ELECTRICITY USE (CONTINUED) Consider self-generation Generating your own electricity might be an option for your business. Wind turbines, solar panels, biomass/biogas systems or natural gas generators can be used to offset some or all of your electricity costs. If your on-site generation can be regulated at different times of the day, you could use it to replace what you would normally consume from the power system during your business s demand peaks or when the price of electricity is high. It can be more economic to generate your own power during these times. An added benefit is that you can have back-up power in the event of power outages. Engage staff in the process Day in and day out your employees operate machinery, control your building management system and turn on computers, lights, etc. Engage employees in the energy management process so that they understand the impact that energy costs have on your organization s bottom line. Engaging staff in the process means that they will be more likely to use electricity efficiently and presents opportunities for ongoing training and collaboration between business units. That can lead to employees that are more likely to share ideas about how energy use can be reduced in their area. St. Marys Cement: A 360-Degree Focus on Energy Management Operating under the name E=MC 2, the St. Marys Cement Energy Management and Conservation Committee developed a 68-item action plan to direct the plant s efforts to reduce its energy consumption and costs. The multi-disciplinary committee was started by Fabio Garcia, Plant Manager, and Jim Storey, Electrical Maintenance Manager for the Bowmanville operations. Both men recognized there was room for improvement in the way St. Marys managed its energy consumption. In early 2006, Garcia and Storey assembled a cross-functional team to ensure all affected business units had input into the committee s mandate, direction and activities. Already, those activities have delivered $870,000 in energy savings. Some of the lowest cost projects yielded the biggest paybacks, Garcia says. The single most important change we made was rescheduling some of our operations to off-peak hours. This concept, known as load shifting, has saved the company hundreds of thousands of dollars. We re glued to the IESO website, Garcia continues. We re constantly monitoring the wholesale price of electricity to plan our operations. And while it s not the easiest way to manage a plant, it s definitely the most economical. In addition to using the price of electricity to guide daily operations at the Bowmanville plant, control room operators also rely on alarms set to go off if the plant approaches pre-determined demand thresholds. By lowering its instantaneous demand for electricity by 500 kilowatts (kw), St. Marys has been able to trim almost $2,000 from its monthly electricity bill. Read the full case study at: 14 Managing Your Electricity Costs

17 Some of the lower cost projects yielded the biggest paybacks. Fabio Garcia, Plant Manager, St. Marys Cement Bowmanville A Guide for Business 15

18 5 CASH IN ON INCENTIVES Taking advantage of incentive programs can go directly to your bottom line. Before you investigate potential retrofits to electrical equipment in your facility, check to see if there are any incentive programs that can help to reduce the cost of the project. Most incentive programs require applications to be submitted before the project is started. Also be sure to investigate demand response programs. They can help your bottom line, and also improve the reliability of Ontario s power system by helping to reduce the strain on the system during times of high demand. Energy Conservation The Ontario Power Authority (OPA) offers several province-wide energy efficiency programs that provide funding to retrofit current electrical equipment and to perform energy audits. There are also incentives for new construction projects that exceed energy efficiency standards in the Ontario Building Code. For more specific program information for your business or home, visit Keith Wernham, energy maintenance when electricity person prices at Jones are Packaging high changes or when a fluorescent there are light high bulb volumes in Your local utility is the delivery agent the manufacturing facility. The fluorescent based of demand on the electricity system. for these province-wide programs, lighting installed replaces the original halide lighting, and may also offer specific programs decreasing Jones consumption of electricity by approximately 600,000 kwh per year. to address local issues. Your utility can also offer insight into other programs and tell you what programs are available in your area. Contact your LDC for more information: Natural gas providers offer a number of conservation and demand management programs designed to increase overall energy efficiency. Contact your natural gas provider for more information on these programs, and how they can work for you. Demand Response The OPA offers demand response programs that pay business, industrial and institutional consumers to reduce 16 Managing Your Electricity Costs

19 FOR MORE INFORMATION ON: Your local distribution company Electricity prices Retail electricity contracts Province-wide conservation programs Federal government Office of Energy Efficiency

20 Independent Electricity System Operator 655 Bay Street, Suite 410 P.O. Box 1 Toronto, Ontario M5G 2K4 Phone: Toll-free: Fax: customer.relations@ieso.ca