Have you ever been hit with an electric bill that took you by surprise? Many consumers, even those responsible for commercial power bills, don’t fully understand the components of their bill and how they work together to create the amount that’s due each month. As a result, consumers are sometimes caught off guard by how much they have to pay.
Even worse, a lack of understanding of the components of your electric bill can cause you to miss opportunities to save money. For many large commercial facilities, restaurants, or hotels, the electric bill is one of their biggest expenses, often running into the tens of thousands or higher. Trimming down your power-related expenses can therefore have a major impact on your bottom line.
Let’s take a look at how a deeper understanding of your electric bill can result in lower monthly bills and more chances to save money.
The Components of Your Power Bill
Depending on your facility’s location and your energy provider, your bill may include a number of different charges, including (but not limited to) consumption, demand, time of use, delivery, and billing fees. These charges may have different names across different providers, but they basically mean the same things. Of these, consumption and demand make up the majority of your power costs.
The consumption charge is probably the easiest to understand. It takes the energy your facility has used during that billing period (measured in kWh or kilowatt-hours) and multiplies it by the rate you pay for that energy. So if your local rate is $0.15/kWh and your facility used 10,000 kWh during the last billing period, your consumption charge will be $1,500. Not so bad, right?
Unfortunately, the consumption charge is usually overshadowed by the demand charge. As the blog at GridPoint notes, “To the electric utility, demand represents the amount of electrical power that has to be generated at any given time.” When demand is higher, the utility company must work harder to supply that demand, and this cost is passed on to the consumer in the form of demand charges. Demand charges are usually measured as the average amount of power you use in a given 15 minute period, and the “peak demand” (the highest average 15-minute interval) is used to calculate your demand charges for that billing cycle. Therefore, “to the consumer, demand represents how fast you use energy and how efficiently you use it.”
For most commercial energy consumers, demand charges make up the largest portion of their bill – sometimes comprising nearly 70 percent of the total amount. That means lowering your demand charge is a surefire way to make a major dent in your monthly energy costs. But how?
Lowering Your Demand Charges
To understand how to lower demand charges, it helps to take a closer look at where your commercial energy usage really comes from. While most people assume that heating and cooling make up the largest percentage of a commercial facility’s power draw (as they do for residential buildings), this isn’t true. In fact, the U.S. Energy Information Administration reports that in 2017 space cooling represented 10.6 percent of commercial energy usage on average. Lighting and ventilationaveraged closer to 11 percent, and “refrigeration was the largest single use of electricity in the commercial sector” at 14 percent of monthly consumption.
Cooling costs fluctuate through the changing seasons, making them a prime opportunity to reduce demand charges during the hotter months, while refrigeration costs tend to remain more even, making them a great opportunity to limit consumption (and substantially impact demand charges as well).
Your Ways to Save
Reducing refrigeration and cooling costs is the best way to reduce consumption and demand charges and save money on your commercial electric bill. While many commercial facilities consider adding alternative energy sources or battery storage solutions and then become overwhelmed by the up-front costs and logistical questions that they include, there’s a simple way to achieve massive energy savings!
At FridgeWize, we save our clients money and reduce their carbon footprint by retrofitting refrigeration and HVAC motors with our innovative, highly energy-efficient technology. Our products pay for themselves within 24 months in the majority of cases and the resulting savings can cut your energy bill by up to 30 percent! As utility rates continue to climb, there’s never been a better time to invest in cutting-edge technology and see massive savings as a result.
Are you ready to reduce your consumption and demand charges and benefit from major energy savings? Contact FridgeWize today to schedule a FREE energy audit.