Wholesale Price Signals Can Help Reduce The Power Bill

Approximately 62 cents out of every dollar Arrowhead Electric receives in revenue pays for wholesale power costs.  Wholesale power is easily our largest expense and one we work hard to keep as low as possible.  Great River Energy (GRE), Arrowhead Electric Cooperatives’ wholesale power supplier, provides price signals on each of its two primary billing components: Energy (kWh’s) and Capacity (kW) which allow our members to help reduce our monthly wholesale power bill.

Price signals are tools used to try and facilitate the consumption of electricity during a specific time period.  Energy is the actual amount of kWh’s consumed by Arrowhead Electric Cooperative members.  Energy costs are billed by GRE based on the hour of the day and on the day of the week.  During certain hours, energy is more expensive than others.  Capacity, on the other hand, is the rate at which energy is delivered to Arrowhead Electric Cooperative and our members.  Capacity is billed based on the GRE coincidental peak.

A coincidental peak is the peak demand for energy by all 28 GRE cooperatives at any one moment in time during the month.  The coincidental peak has historically been around 7 or 8pm when members are making dinner, washing clothes, and have on a number of lights. During the summer season the capacity charge is at its highest when demand for electricity is high.  The capacity charge is reduced in the winter when demand is not as high as in the summer.  The capacity charge is at its lowest in the fall and spring months when demand by consumers is at its lowest.  

It is important to note that all the electricity sold on the off-peak heating and dual fuel programs is not included in the capacity billing and is sold at a less costly energy rate than general service electricity which we use for lights, cooking, computers etc…  Since we turn off-peak and dual fuel loads “off” during the monthly billing peak, they are not included in the rate and can be used when electricity demand is low enabling a lesser energy cost than electricity sold at other times of the day.

How does the price signal provided by GRE help us lower our wholesale bill?  The following chart compares heating degree-days (as measured in Duluth) to the Arrowhead Electric energy and capacity sales over the past 5 years.

*mWh is equal to kWh’s X 1,000

You may have identified one significant trend in the chart.  That is, as heating degree-days increase so does the demand and consumption of electricity by our members.  In other words, we are heavily dependent upon the weather; especially cold weather.

As a member, you can help lower the wholesale power bill which will help reduce future rate increases.  Arrowhead Electric has calculated that for every 1% of monthly energy sales we move from the on-peak time to the off-peak time we can save over $8,000 annually.  Further, by reducing the amount of energy we use over the GRE coincidental peak can save an additional $9,600 annually.  Combined, that’s a savings of nearly $18,000 for every 1% of electricity we can shift to off-peak hours.

When should you use electricity?  Electricity is a requirement for the majority of people.  It is something we use at all hours of the day, not just during the off-peak hours.  However, as members, anything you can do to use energy after 8pm or prior to 10am in the morning will help reduce the wholesale power bill and put less pressure on the cooperative to increase rates in the future.

If you use electricity to heat your home, switching to the off-peak or dual fuel program will not only cut the wholesale power bill it will reduce your monthly bill.  Other things you can do include using larger appliances during off-peak hours.  For example, many dishwashers are equipped with a delay feature which allows them to begin operation at night while you’re sleeping.  Small changes including switching to CFL light bulbs and taking shorter showers to use less hot water does more than shift energy use, they reduce energy use all together.

 As energy prices continue to increase it is becoming more important that as consumers of energy you learn how to manage your costs through education, conservation and energy efficiency.  To learn more about energy conservation stop in or call the office Monday through Friday 8am – 4:30pm or visit our website at www.aecimn.com.

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