3 Ways to Save on Your Electricity Bill
The Challenge of Rising Electricity Costs
Many Americans are all too familiar with the rising cost of electricity, receiving staggering monthly bills that impact both residential and commercial customers alike. In fact, August 2022 energy bills saw the largest increase since 1981, a 15.8% gain from the same period a year ago.
Despite these historic costs, many energy consumers have struggled to find strategies to save money. This issue has been particularly pronounced for businesses in the SMB sector, which have largely had to accept rising electricity costs as an ever-growing component of their operating expenses. This highlights the need for solutions that combat this trend and help keep energy costs under control.
Making Sense of the Costs on a Typical Utility Bill
To save money on electricity bills, it is important to first understand the different charges levied by utilities and how they are calculated.
- Demand Charge - This is a monthly fee that you pay based on your highest recorded energy demand during the billing period. You can think of demand charges as monthly charges that you pay as part of the cost of maintaining the electric utility's infrastructure required to deliver electricity to your building.
- Measured in kW, demand charges are used by utilities to determine the maximum amount of power they must be able to provide to you at any given time.
- For many customers, the demand charge comprises 50% or more of the bill, demonstrating how this is a critical area to save money.
- Energy Charges - These are costs for the energy consumed during the billing period, measured in kWh.
- Many utilities offer time-of-use (TOU) rate plans where the cost of electricity varies throughout the day based on grid stress levels. Electricity is most expensive during peak pricing hours, which often occur between 4PM and 9PM and represent the window when the grid is most stressed.
- For customers that opt for a TOU rate structure, energy charges are separated by peak and off-peak hours.
- There exists an opportunity to save money by shifting energy use away from peak hours towards off-peak.
- Total Usage - This metric measures the total amount of energy consumed over the billing period for both peak and off-peak hours. Customers can save money by reducing their net energy usage.
3 Best Practices to Achieve Savings
Now that we’ve established some of the most common charges on a monthly electricity bill, we can explore potential strategies to drive savings.
- Reduce Demand Charges - This can be achieved through efforts to decrease the maximum energy demand your business exhibits in a billing cycle.
- For example, when you open your store for business in the morning, you can stagger the process of turning equipment on to avoid creating an energy peak caused by everything being turned on at once.
- Optimize Energy Charges - This can be accomplished by minimizing the amount of energy that is consumed during peak pricing hours, and shifting as much energy use as possible to off-peak hours.
- For example, your business could turn off non-essential electrical equipment from 4PM - 9PM throughout the week..
- Cut Back Total Usage - One of the simplest ways to save money is to reduce the overall amount of energy that your business consumes.
- For example, you can invest in energy-efficient appliances, such as lighting and cooking equipment to scale back costs over the long term.
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