Curtailing Energy During ‘Peak Power Hour’ Reduces Next Year’s Rates

by | Jul 11, 2013

Joule chartBusinesses may not be aware that the amount of electricity they use during the one hour of peak power demand in their region influences how much their electricity rates are adjusted up or down for a full year, according to Joule Assets. For instance, in New York City, a single peak hour can determine 25 percent of a company’s electric bill for 12 months. Knowing this in advance, businesses can curtail electricity use during expected peak hours through self-directed actions in order to pay less for power the next year.

This week, Joule Assets launched its new Joule Peak Power Index, which forecasts when major metro areas are likely to experience the “peak power hour” of the year in their region – the one hour of highest electricity demand in each region that influences how much electricity prices are ratcheted up or down for a full year. The Joule Peak Power Index assesses total electricity expected to be consumed in each locale during peak hours of usage, forecasts the hours in each region that the peak power hour will occur, and calculates its projected impact on metro area electricity bills.

According to Dennis Quinn, COO of Joule Assets, the “peak load contribution” for an end-user is determined by the free wholesale market and passed on to any entity selling electricity to end-users. The electricity provider passes this cost on to its customers however it wants, but usually looks at each customers’ peak load contribution and charges it proportionately.

Mike Gordon, CEO of Joule Assets, elaborated further: “It’s a mechanism by which everyone who buys electricity has a certain tag attached to them that’s called the ‘capacity tag.’ That tag is based completely on what they consumed in one hour of the year. Then, whomever supplies them with electricity has to purchase that amount of electricity in the capacity market. In NY, the price of capacity is roughly $110,000 per megawatt. So, if I consume 1 MW less during that one hour, the electricity supplier who serves me will save $110,000. Since the consumer can buy electricity from anyone, electricity suppliers pass that savings on to anyone they’re bidding to serve.”

Throughout the summer months, Joule Assets will publish its index on a daily basis for Baltimore, Boston, Chicago, Dallas, Houston, New York City, Philadelphia, and Washington DC, in order to increase awareness and planning around energy use for businesses.

The above chart provides Joule’s Peak Power Index for July 10 for each city, the time range (local time) during which the peak hour is most likely to occur, and the estimated influence of that hour on next year’s bill, with information on how the figures were calculated.

Highlights of Joule’s Peak Power Index for July 10:

  • Baltimore, Chicago, Philadelphia and Washington DC received an index score of “8.5” on a scale of 1-10, indicating high probability of reaching a peak power hour.
  • Dallas and Houston also have strong probability of experiencing a peak power hour with an index score of “8.0.”
  • New York and Boston scored the lowest probability for peak use of the cities included in the index, with scores of “3.5” and “1.0,” respectively.

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