BY CHRISTOPHER SENGER
In a world of excess generation and reduced consumption, making sure there is enough capacity to go around is about the last thing utilities have to worry about. Keeping revenue high is another story. Demand charges are making a comeback. You’ll need to sharpen your math skills to get a handle on energy costs.
Many utilities eliminated demand monitoring equipment, but the move toward smart metering is resurrecting demand billing. Utilities are placing renewed emphasis on demand charges for residential, commercial, industrial, and municipal accounts.
Demand billing allows utilities to pass through capacity-related costs. It creates price inelasticity–even though customers might reduce consumption because of difficult economic times, bills stay the same. Creative billing has always been a staple of utility business practices. Just when you think you have a handle on your electricity charges the rules change.
Continuously shifting billing methods keeps the customer guessing and the revenue flowing. I liken the game to three card monte. Or the game at the supermarket in which manufacturers package products in ever-smaller containers and vary pricing to keep you in the dark. It’s a math workout to go shopping these days. Marketing and packaging experts hope you will tire of trying to figure out whether chips in a 10.5 once bag are a better value than chips in a 16 once package. Or that you lack the math skills to figure it out.
So shopper emptor. Keep those math skills sharp. And remember, reducing usage is not the same as reducing costs.