When you open your June electric bill, you’re in for a shock. As capacity costs increases continue to drive up costs year after year, companies seek innovative solutions to mitigate the impact on their bottom line. 

What is happening:

• Capacity Change: A significant capacity change is scheduled for June 2025.
• Impact: This change is expected to increase electricity costs for businesses in our area.
• Potential Increase: We’re projecting a 20% rise in electricity expenses.

Understanding Capacity Costs 

Capacity is a key component of your energy bill. Capacity represents your business’s peak power demand to ensure the grid has enough power to meet future energy demand. Capacity compromises 5-8% of total electricity spending. However, these costs are rising and are projected to continue increasing over the next 5 years due to: 

• Growing demand on the energy grid 
• Changing weather conditions 
• Limited energy supply 

Ways to Mitigate Increasing Capacity Costs 

• Conduct a Professional Energy Audit. Electricity purchasing for manufacturing plants is complex and differs from residential consumption. Oftentimes, energy bills are not entirely understood and get paid without breaking down the set of charges within 
• Receiving professional analysis includes conducting bill analysis to review billing errors, tariffs/taxes, rate codes, and procurement strategy. 

Avoid Fixed Costs Contracts

• When investing in fixed-cost energy contracts, companies review projected energy costs and charge premiums to estimate the worst-case energy cost for set periods. This model avoids benefits from price dips and dynamic pricing. 
• We recommend using managed hedge strategies to purchase energy on cost-effective dates through programs that review monthly indexes to bill energy and track energy costs in real time. 
• There are innovative programs that invest, at no upfront cost, in energy solutions and create payback structures that energy savings can subsidize and become cash-positive by increasing efficiency in manufacturing. 

Create a Peak Demand Response Program

• Engage in strategies to lower your business’s capacity costs
  • Define loads that can be shed between 2 and 6 p.m. 
  • Pre-cooling or pre-heating spaces outside peak times 
  • Powering down unrequired lighting 
  • Use backup generators 
  • Assign onside monitors to manage demand response 

Efficiency Solutions 

• Lighting: check the status of outdated lighting that could be replaced with a light-emitting diode (LED). LED lighting is highly energy efficient and long-lasting, offering significant energy savings and reduced maintenance costs. 
• Compressed air systems: conduct leak studies to measure efficiency for energy-saving opportunities. 
• HVAC upgrades: upgrade equipment and study ventilation for improvements. 
• Financial savings: study potential tax benefits, renewable energy credits, utility incentives, business-specific grants, and/or funding mechanisms for financial saving opportunities. 

By partnering with energy auditors, avoiding overpriced fixed contracts, and investing in efficiency solutions, manufacturers can improve the efficiency of their energy usage and potentially save up to 15% on energy costs. 

Get started with our risk-free energy audit today.