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Factors Affecting Your Energy Costs

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Many factors play into the price consumers pay for their electric and natural gas needs. Obvious factors such as weather and natural gas reserves play a role, but the percentage is low compared to other determinants.

One little known factor is capacity charges. Balancing energy demand with energy supply is one of the most important objectives of an energy system. If there is not enough energy being generated, the energy grid can experience brownouts or blackouts.

Capacity markets were created to help ensure that there is enough electricity supply available on the grid at all times to serve homes, businesses, hospitals and municipal buildings on the hottest and coldest days of the year — at the lowest possible cost.

The retiring of antiquated plants across the United States in recent years has placed an increased burden on the remaining plants. As a result, capacity market rates have increased.

Capacity rates alone do not determine the total monthly capacity cost. The Peak Load Contribution (PLC) also factors into calculating monthly capacity charges.

The PLC represents average peak demand measured during the five highest-demand days of the summer between June and September. In Maryland, the PJM (the electricity grid operator) determines the five hours of the summer when the demand is the highest. Total monthly capacity cost is the product of PLC kilowatt-hours multiplied by the monthly capacity rate. By controlling PLC, customers can reduce their overall energy cost.

Transmission costs represent another contributing factor and cover the bulk transfer of electrical energy from generating power plants to electrical substations near demand centers. Transmission rates cover the cost of providing these bulk transmission services and provide a return on the associated capital invested in the transmission infrastructure.

Changes to transmission rates only occur upon approval by the Federal Energy Regulatory Commission (FERC). Recent approvals by FERC have resulted in increased transmission charges for both residential and commercial accounts.

Although actual electricity generation costs are lower, the increase in capacity and transmission charges has caused the electric utility rate that consumers pay to increase. Increases are expected throughout all of the PJM territory for the next 12–18 months.

Yet another factor increasing overall energy bills are utility surcharges. Among the common surcharges in Maryland are the following:

  • EmPower Maryland Charge (also known as the BGE Smart Energy Savers Program): the cost to develop and deliver energy efficiency programs in support of a statewide initiative to reduce electric consumption and demand 15% by 2015.
  • Demand Resource Surcharge: A surcharge that allows the utility to apply the costs or benefits resulting from a PSC Order that requires utilities to enter into contracts with demand resource providers for the June 1, 2011, through May 31, 2016, power planning years, with a two-year extension provision (June 1, 2016 –May 31, 2018), to help reduce energy demand in peak times such as on extremely hot days.
  • The Electric Reliability Initiative Charge (for electric customers only): This was approved by the Maryland Public Service Commission to enhance the safety and reliability of the utility’s electric distribution system.
  • STRIDE Charge: A monthly charge to gas customers for the utility’s Strategic Infrastructure Development and Enhancement plan, implemented in compliance with Maryland law and with the approval of the Maryland Public Service Commission. It is designed to accelerate the modernization of a utility’s natural gas distribution system in order to enhance system safety and reliability.

CQI Associates of Columbia provides a program to assist commercial and residential customers with the purchase of electricity and natural gas supply services.  Joining one of the Baltimore Washington Corridor Chamber’s commercial and residential energy cooperatives (Co-Op) is an easy way to manage rising energy cost.

There are many benefits of joining the Co-Op:

  • Customers receive an all-in fixed rate for supply services on electric and natural gas bills that will not change during the contract term.
  • The Co-Op offers Chamber members group buying power, which results in lower rates.
  • The Co-Op consultant, CQI Associates, licensed by the state of Maryland, professionally manages the Co-Op program and has 19 years of industry experience in Maryland.
  • The Co-Op offers options to obtain up to 100% clean, renewable, wind-powered electricity service.

Pricing for 12-, 24- and 36-month contracts will provide long-term budget stability to help manage energy costs well through to 2017.

Learn how your business and home can benefit from joining the Commercial Energy Purchasing Cooperative by calling Joe Tabeling at 443-472-3870 or e-mailing joe@cqiassociates.com.