Understanding your energy bill is crucial for managing costs and improving efficiency as a business owner or facility manager.

Decoding Your Energy Bill

Energy Consumption (kWh)

Your bill will show the total kilowatt-hours (kWh) consumed during the billing period. This represents the actual amount of electricity your facility uses. To better manage this:

• Track your usage patterns over time
• Identify any unusual spikes in consumption
• Compare usage to similar periods in previous years

Demand Charges (kW)

Many commercial and industrial clients face demand charges based on their highest electricity consumption rate during a billing period. These charges can significantly impact your overall costs. To reduce demand charges:

• Implement load-shifting strategies
• Stagger the start-up of high-power equipment
• Consider on-site energy storage solutions

Time-of-Use Rates

If your utility offers time-of-use pricing, your bill may show different rates for peak and off-peak hours[1]. To optimize for these rates:

• Shift energy-intensive operations to off-peak hours when possible
• Use automated systems to manage equipment schedules
• Consider energy storage to arbitrage between high and low-cost periods

Understanding Additional Charges

Power Factor Charges

Industrial clients may see power factor charges on their bills. Improving your power factor can eliminate these charges and increase overall efficiency. Consider:

• Installing power factor correction equipment
• Regularly maintaining motors and other inductive loads

Transmission and Distribution Charges

These charges cover the cost of delivering electricity to your facility. While you can’t directly control these, understanding them helps budget and location planning for multi-site operations.

---

Transmission and Distribution (T&D) charges are important components of a commercial energy bill that cover the costs of delivering electricity from power plants to end users. Here’s an explanation of these charges:

Transmission Charges

Transmission charges cover the costs associated with moving high-voltage electricity over long distances from generation facilities to local distribution systems. Specifically, they include:

• Construction, maintenance, and operation of high-voltage transmission lines and substations
• Equipment used to transform electricity to higher voltages for efficient long-distance transmission
• Costs for moving electricity across the regional power grid

Transmission charges are typically regulated by federal authorities like the Federal Energy Regulatory Commission (FERC).

Distribution Charges

Distribution charges cover the costs of delivering electricity from the high-voltage transmission system to individual customers. This includes:

• Construction, maintenance, and operation of local distribution lines, transformers, and substations
• Equipment used to lower voltage for final delivery to customers
• Meter reading, billing, and customer service costs
• Local grid reliability and maintenance

Distribution charges are usually regulated by state public utility commissions.

Key Points About T&D Charges

• T&D charges are separate from the cost of electricity generation/supply
• They are typically unavoidable, even if you choose an alternative electricity supplier
• Charges are based on your electricity usage and demand
• T&D infrastructure costs have been rising in many areas due to grid upgrades and maintenance
• In some markets, transmission charges may be bundled with generation costs

Understanding these charges can help commercial customers better manage their overall energy costs. While you can’t avoid T&D charges entirely, energy efficiency measures and demand management can help reduce their impact on your bill.