ASHRAE Journal - April 2015 - 68

TECHNICAL FEATURE

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$0.120
ISO/RTOs' operation and maintenance
$0.100
costs are determined through a regulatory
procedure, not an auction, but they are typi$0.080
cally also charged to the customer through a
$0.060
PLC-type process. This is the case in ERCOT,
$0.040
which uses a "4CP" calculation to determine
$0.020
its transmission cost recovery charges. In
$0.000
ERCOT, the customer's assessed kW is based
on the average of its consumption during
the highest demand hour in each of the four
FIGURE 3 PEPCO Washington D.C. prices, average July Weekday. Source: PJM Interconnection. Average weekday Locational Marginal Price of electricity in PEPCO (Washington, D.C. area) in July 2013. Prices reached their
summer months, from June to September.
highest at 2 p.m., at 9.7 cents per kWh; the highest hour during the month was 2 p.m. on July 17th, when prices
Two additional notes are warranted on grid
reached 40.1 cents/kWh. Prices were at their lowest at 4 a.m., when they averaged 2.1 cents/kWh.
demand charges. First, they are frequently
ratcheted: the peak load contribution
that a customer sets in the summer will affect its grid
thermal storage is a cost-effective plan. As the graphic
demand charges for a full year. Second, there is often a
of summertime real-time locational marginal prices in
lag between when a customer's peak load contribution
Washington, D.C.-area PEPCO shows, nighttime elecis assessed, and when it is levied. In PJM, NYISO, and
tricity on the real-time market tends to be much less
ERCOT, the grid demand charges that a customer must
expensive and less volatile.
pay are based on its PLC from the year before. Therefore,
It is important to note that regardless of whether a
in these regions, customers who set high PLCs in the
customer is on real-time pricing or a fixed rate, it is still
summer of 2014 will begin paying higher grid demand
likely to pay demand charges.
charges beginning in the summer of 2015.
Special Rate Structures
Since grid demand charges are frequently obscured in
Some utilities offer special rate structures for customthe customer bill, it is typically a subject worth inquiring
about with one's utility or third-party provider, or with a bill- ers who have particularly high load factors. For example,
ing expert. These charges can be substantial, and are very Potomac Edison in West Virginia offers a special High
often blended into other charges within the electric bill. Load Factor schedule for large customers; these customCustomers that would like to identify their grid demand ers pay a slightly higher demand charge than normal
charges and find solutions to reduce those costs can often ask users, but they are compensated with a lower cents per
and receive for the ISO/RTO demand charges to be separated kWh usage charge.5 This benefits industrial customers
with 24x7 operations and a flat load curve: the increase
and listed on their bill in an itemized, line-by-line format.
in demand charges is offset many times over by the
Real-Time Pricing: Following the Market
decrease in cents/kWh.
Real-time pricing, also known as "indexed" or "floatOther special rate structures are given to customers
ing" rates, allow end-users to buy energy at the prewith specific technologies, such as thermal energy storvailing market price, rather than at a fixed cents per
age (TES). Austin Energy in Texas offers a special rate to
kilowatt-hour price. Over the long run, this tends to be
end-users with thermal storage onsite.6 In exchange for
a slightly higher demand charge, customers in the speless expensive: fixed pricing is an insurance mechacial TES Rate pay lower cents/kWh for most of the year,
nism, and insurance typically comes at a premium.
However, employing real-time pricing leaves customers particularly during nighttime hours; in the summer
months (June through September), TES rate customers
more exposed to the vagaries of the open market: if the
weather is unexpectedly hot or cold, or a large generator pay only 2.7 cents/kWh between 10 p.m. and 6 a.m., in
contrast to the typical user's 6.4 cents/kWh. Since TES
fails, prices can spike dramatically.
users consume a significant amount of electricity at
For customers willing to manage the risk of cheaper
night, when they are charging up their thermal storage
but spikier real-time pricing, shifting load from day
systems, the TES rate provides immense savings.
to night with smart building technologies such as
68

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