What do we value the most? Is it our Time? Or is it our Money? While we recognize that there will be a longer wait if we go out to eat during the Friday Dinner rush, if we are visiting with friends, we might not care about the wait. On the other hand, if we are rushed to beat a deadline, we might order out. Some of us pay extra to avoid lines by using the Valet for parking. Others might camp out overnight to be in line to get the big item on sale tomorrow. Our time has to be assigned a value and we really do this all day long as we make decisions like whether to wait in the budget gas line or drive down the street and pay a little more. We make decisions concerning when to go shopping, whether to go to the convenience store and pay more or to the bulk wholesaler to get more and pay less. Sometimes we choose Time over Money and other times we choose Money over Time. But wouldn’t we all love the rare opportunity to save both?

Electricity currently is different that any other item we buy on a regular basis because it is always available without delay, no matter when we want it and regardless as to how much other people on the line are using it. However, we receive a bill each month that tells us what we must and, while most people do not realize this, the amount is directly related no only to how much electricity was used but also when it was used.

Let me state the above again. A large component in the cost of a typical residential electric bill is caused by everyone using electricity at the same time. If we could spread out our use over the day, we would all save substantially.

Since electricity is readily available anytime we flip a switch, we mistakenly may think that it costs the same no matter when or how we use it. The truth, however, is that how we use electricity does affect how much we have to pay for it. Most Electric company pricing formulas (called tariffs) are set up where all homeowners pay the same per unit of electricity (measured in watts) no matter how many units they use or when they use the units. However, the wholesale power cost that the Electric Company has to pay is very dependent on when the electricity units are actually used. Ideally, electricity would be generated all day long at a steady pace and put into a big holding tank for dispensing to anyone that needs it at any time. Properly engineered water systems operate this way with a pump steadily filling a water tower that is sized to have enough elevated water to meet the peak demands throughout the typical day.

Unfortunately with our current technology, alternating current electricity, unlike water, is generated, transported, and consumed in a form that cannot be stored for later use. Since no storage capability is available, every time we flip a light switch on, a generation source at the other end of the line feels the loss of power in the system and uses more energy in order to raise the voltage to replace the loss from the newly added load. When we flip the switch off, a plant has to recognize the lower need and unload capacity to keep the voltage from getting too high and causing damage to all the connected loads. Of course one light switch won’t make a difference but thousands of lights, ovens, dryers, hot water heaters and air conditioners flipping on or off at near the same time can cause some very great load swings on electricity generation and transmission systems.

For our purposes, we need to realize that a local Electric Company including Electric Cooperatives buy all of their electricity from others companies that generate and transport the electricity for local delivery. We all pay for the cost of fuel for this electricity through a unit price that is not dependent on when we used the electricity during the billing period. However, what many people do not realize is that the most common way that the cost is recovered for the tremendous debt payments for the massive generation plants and thousands of miles of transmission lines is by looking at how much power is being used by each Electric Company when the system hits it Summer Peak Demand. Lets take a hypothetical generation plant that serves power for two Cooperatives. Each Cooperative has exactly the same number of members and uses the same amount of electricity per member each year. Therefore, the cost of financing the generation plant is split 50/50 between the Cooperatives. Last year’s Summer peak was 10,000 Mega Watts of Electricity which is near the capacity of the existing plant. The debt payment of the Generation Plant is $10 million a month. Last year the peak was evenly split between the two Coops with each paying $5 million a month. 50% each x $10,000,000 = $5,000,000

Coop A says that nobody cares about the cost of electricity and does nothing different this year than last. Their Summer Peak ends up being 10,800 mega watts this year. This causes the Generation company to begin planning to add onto their plant in order to meet the new growth. However, this year, Coop B decided to implement a program to try to get its member to cut back their use during the historical peak time. This is between 4:00 and 8:00 every afternoon. They ask members to cut back on using electricity for ovens, stoves, unnecessary lighting, for cooling unoccupied spaces, and for running pool pumps during the 4:00 PM to 8:00 PM period. As a result, they actually reduce their demand to 9,500 mega watts.

After seeing the efforts of Coop B, the Generation Company decides to hold off on their expensive upgrades and they divide up the debt cost formula between the two cooperatives as follows:
Cooperative A: 10,800 / (10,800 + 9500) = 53.2% leaving 46.8% for Cooperative B.

The monthly bills therefore are:
Cooperative A: $10,000,000 x 53.2% = $5,320,000 leaving $4,680,000 for Coop B.

So, Cooperative B’s clothes all get dried, they still eat, the pools still get cleaned and chlorinated but the members are able to split $320,000 a month in debt service savings just by rearranging when they use electricity. If Cooperative A were to implement the same efforts next year, Cooperative B’s share would increase but the end result would be that no new generation capacity would be required so everyone still benefits in the long run. In case you wonder where this saving will be seen, it will be seen in a reduction of the Power Cost Recovery Factor (PCRF) that is set each month to cover the difference between amount collected by the utility tariff formula and the amount billed by the generation company.

Ways to save during the 4:00 PM to 8:00 PM time period include:

1. Use larger water heaters with more storage capacity and turn them off with a time clock between the 4:00 PM and 8:00 PM Peak period. You still will have the hot water stored. (This is the closest thing we have today to being able to store energy in a residence.) Whatever you do: DO NOT install an On Demand Electric Water Heater.

2. Use programmable thermostats to cut back on air conditioning run time for areas of your home that do have to be occupied between 4:00 PM and 8:00 PM every day in June, July, August, and September each year. This goes against conventional wisdom that used to say to bring the unit on around 5:00 PM. It is actually better to bring it on at least an hour before (3:00 PM) so the unit might be able to cycle off during the peak period. Of course the best option if you have multiple units is to wait until 8:00 PM to bring on the air conditioning for the bedroom areas of the house.

3. Even if air conditioning off time is not feasible, having your unit serviced and working as efficiently as possible is recommended. A unit that is slightly undercharged or has restricted air flow indoor or out can easily use 20% or more electricity than a properly serviced unit. Also, when you replace equipment, go for the options with the higher SEER and EER ratings. These ratings are like miles per gallon for your car. The higher the number, the more you save. The minimum SEER today is 13 and it is very common for systems in the 16 to 17 range to be available. If you really want to save, geothermal heat pumps can go even higher.

4. Studies show that much of the air conditioning capacity is lost before the cool air ever enters the house. This is due to leaky and poorly insulated duct work. If you are having issues with high bills, poor air quality, or uncomfortable spaces in the home, you might benefit from having your duct system inspected and improved. It is very possible that repairing faulty ducting can do more in savings that replacing older inefficient equipment. Doing both at the same time saves even more.

5. Pool pumps, pool heaters, clothes/dish dryers, ovens, welders, lighting and other optional loads that can be simply left off during the peak between 4:00 PM and 8:00 PM probably offer the greatest savings opportunity. Now that we all realize that tremendous savings can be achieved, we can make better electricity scheduling choices.

6. While not currently a problem in our area, attempts at lowering the peak that occurs between 4:00 PM and 8:00 PM can cause other peaks to occur. These “shadow” peaks must be managed as well and fortunately for us, technology is being developed with smart appliances and smart grids where the decision on when appliances will run will be determined automatically. Until then, we will need to keep communications open between consumers and their electrical providers.

Remember that by working together, we can Beat the Peak and save a lot of money. The 2009 Peak months will be June, July, August, and September. The Historical Peak Time has always fallen between 4:00 PM and 8:00 PM so the best plan is to try to cut back as much as possible during this period of time 7 days a week. Also, we know that the peak will most likely occur on a really hot day. So, when the weather men start talking about heat advisories and Ozone days, we need to think saving $$’s as we consider what electricity loads we might be able to cut back using between 4:00 PM and 8:00 PM that day.

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