Just five hours of consumption drive 20-30% of your electricity costs. These hours determine how much capacity a supplier has to purchase to serve your load. The rate for capacity is determined by an annual auction. Once the auction rate is cleared it is set and customers via their supplier will be charged this rate. Basically what I said is here is another energy cost component you can’t control…or can you?
Although you can’t change the auction rate charged for capacity, you can change the amount of capacity you have to buy. The amount of capacity suppliers are required to purchase for you is determined by your Peak Load Contribution(PLC). Each fall, PJM looks back at the previous summer and determines the 5 highest consumption hours for the entire 13 state grid. Once they determine these hours, they look to your meter to see what you were consuming on those hours. Your specific consumption on these 5 hours is averaged to determine your PLC. This PLC is set each summer and determines your capacity costs for the coming year.
So, here comes the strategy….if you are notified when these hours may occur, and you reduce consumption during those hours, you can reduce your costs for the entire next year!
Looking back on the past six years, 80% of the PLC hours have occurred between the hours of 4 and 5 pm.For many manufacturers, this time of the day is very close to an employee shift change. By moving the shift change to hit between 4-5 pm, chances are you will have a lower electricity draw on those hours, thereby reducing your PLC.
Let’s close with some money. A customer with a 1 MW PLC located in FirstEnergy territory will pay approximately $125,000 for capacity in 2015. If this customer can reduce their PLC by 50% this summer it will improve their budget by $62,000. Now that is a nice hourly rate for taking a break!