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The Golden Hours: The Impact of Peak Demands on Electric Rates

By Seth Wheeler, New Hampshire Electric Co-op

Theyre out there. Each month well hit one, usually on a weekday afternoon or early evening. Theyre called Peak Demand hours, the few occasions when demand for electricity is at its highest. They happen in an instant but Peak Demand hours are increasingly affecting what you pay for electric service for an entire year.

This chart shows the impact of Peak Demand reduction efforts that were undertaken by NHEC members as part of a pilot program that charged higher rates during Peak Demand hours. It shows that participating members significantly reduced usage during Peak Demand hours, which are shaded in the chart.

This chart shows the impact of Peak Demand reduction efforts that were undertaken by NHEC members as part of a pilot program that charged higher rates during Peak Demand hours. It shows that participating members significantly reduced usage during Peak Demand hours, which are shaded in the chart.

The cost of moving large amounts of electricity from one place to another, which appears on your electric bill as transmission, is much higher in New England than in other parts of the country. It’s so high, in fact, that the Federal Energy Regulatory Commission (FERC) has opened an investigation to explore why transmission costs make up a larger share of electric costs in New England than in other major power grids across the country. In an order issued on Dec. 28, 2015, FERC commissioners wrote that New England transmission rates appear to be “unjust, unreasonable and unduly discriminatory or preferential” and called for an investigation.

While these issues play out on the regional and national levels, there are various initiatives being undertaken by electric utilities that aim to lessen the impact of high transmission costs on electric rates.

Reduce Peaks, Reduce Rates

Your electric bill has two big components – the price of electricity and the cost to get it to your home or business. New Hampshire Electric Cooperative (NHEC), which serves 83,000 homes and businesses in 115 New Hampshire communities, does not generate electricity and does not own high voltage transmission lines. Instead, we purchase power for use by our members and pay the owners of the generation and transmission lines that deliver it to our distribution system. While its difficult for us to affect the cost of wholesale power in New England, theres a lot we can do to lower the costs charged to us to deliver that power. The most effective way is to reduce Peak Demands.

Family by fire from refinedllc.com

Family by fire from refinedllc.com

Peak Demands are a relatively small number of one-hour time periods during the year when demand for electricity is at its highest. The New England Annual Peak Demand typically occurs during the late afternoon or early evening of a weekday during a stretch of hot weather. In total, nearly all of NHECs transmission costs are incurred during approximately 150 hours per year and the cost to members is nearly 2.5 cents per kWh. If we can reduce the amount of power we need delivered to meet the needs of our members during those short time periods of Peak Demand, we can lower electric rates for all members.

Later this year, NHEC will be launching new programs aimed at reducing the impact of Peak Demands on the electric rates paid by members. There will be several ways to participate, ranging from direct load control programs to time-of-use rates that include daily on-peak and off-peak rates. Members will also have the option to be notified by text or email when Peak Demand events are occurring, so that they can reduce their electric usage. The goal is simple but its going to take a truly cooperative effort to make a difference.

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