Small Business - Time-Of-Use Pricing Options

Business customers shopping for an electricity supplier should check for pricing options based on the time when they actually use electricity. These options offer an opportunity for lower electricity prices during certain hours of the day, days of the week or even seasons of the year.

Before settling on an electricity supplier, learn your present electricity usage pattern by reviewing historical usage information for your business. The information is available from your local electric distribution company. Some electricity providers may refer to this historical usage information as a load profile.

A business may find that it can significantly reduce its electricity costs by rescheduling its usage. For example, a factory that can schedule production runs during the night may pay less for electricity during that time. Or, a water authority could run its electric pumps to fill large storage tanks at night and pay less for the electricity used to run the pumps.

Here are some examples of pricing tied to when electricity is used. Before deciding on a supplier of electricity, you should consider the needs of your business against all the options available.

Time-of-use rates and metering. The cost of producing electricity varies throughout the day. Time-of-use rates and metering connect the amount of electricity used with the time it was used. Like long distance telephone calls, prices are higher during some periods of the day than others. Customers with this type of pricing plan can save money by moving their greatest electricity usage to periods when the prices are lowest.

Real-time pricing. At the end of a business day, customers with the real-time pricing option are quoted actual prices for electricity for each hour of the next business day. Special meters record electricity usage for each hour. The amount billed is based on the price set for each hour. Customers truly pay a commodity price based on actual costs, not a rate based on average costs. Customers can reduce their electricity costs by adjusting their usage to the most favorable hours of the day based on the actual prices they'll be charged.

Discounts for curtailing electricity usage. During periods of high demand for electricity, such as during a heat wave, power suppliers may face difficulty keeping up with demand. Also, the prices they would have to pay for additional electricity to serve their customers would be extremely high. As a result, suppliers may offer special credits to customers who, when asked, agree to reduce usage by a predetermined amount. For example, a large industrial facility could receive a credit on its electricity bill for cutting back its usage during a heat wave. Or, a hospital could receive a credit from its supplier on its bill for running its emergency generators to reduce the demand on its supplier for electricity.

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