Editor's Letter

June 26, 2014

Stop July's Swelter from Ratcheting Your Energy Costs.

July is the hottest month, but you don't want to get burned in places where you can avoid it, like ratchet charges from your utility. 

You might think that June would edge out July as the hottest month because the longest day in the northern hemisphere – and thus the day when the U.S. absorbs the most sunlight – is June 21.

But a factor in outdoor temperatures is the fact that the earth – much like your building and the rest of the built environment – absorbs the sun's energy to its capacity and then radiates it back into the atmosphere, the average high U.S. temperature is 84.4 degrees. The hottest month since 1895 in the U.S. was in July 1936, the height of the Dust Bowl. 

So July should warm up your interest in your energy bill. Somehow your utility must recoup the cost of the additional capacity to meet extreme demand. Often these costs involve operating so-called peaker plants that are fired up only as necessary. Peaker plants tend to be less efficient, thus they are more costly to operate and generate higher levels of greenhouse gases per kW produced. 

How is your utility recovering its costs? You and your CFO should be able to see it – more or less transparently – on your utility bills, allowing you to determine the potential dollar benefit of evasive maneuvers. You may see a higher supply charge for on-peak times. You may have a ratchet charge based on your peak demand. In this scenario, it's not how much you use but how fast you use it that affects your minimum demand charge for up to the next 11 months, no matter what your actual consumption is. 

Another thing to keep in mind this month is the possibility of double jeopardy. Equipment often consumes the most electricity at start-up. If you don't have a staggered start-up procedure, your facility could suffer the pain of a higher demand charge after a summer blackout if everything goes online at the same time. 

The combination of lost production time and a higher demand baseline can make your electrical bill hot to the touch long after your building has rejected July's heat. 

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