Average commercial energy bills vary by state, but overall the US Energy Administration estimated costs at more than $650/month. For larger businesses, those costs can be much higher.
But energy consumption and location are not the only factors on that bill. Other terms include transition and transmission charges, rate codes and distribution demand. Any individual line item, over the course of a year, can really add up.
The first step to saving money is to make sense of that energy bill.
Here’s how to decipher your commercial energy bill.
The Common Terms
Some businesses receive a dual energy bill and some a consolidated bill. Whether it comes in two forms or one, they add up to the same things–supply charges and delivery charges.
- Supply charges – The electricity consumed.
- Deliver charges – The utility infrastructure, such as lines, poles, transformers and their maintenance.
Some consolidated bills will still break down the charges into these two subheadings.
The energy or supply charges are the amount of energy consumed. They will generally also label the demand charges as such.
Demand charges are a calculated highest quantity of energy consumed at a single time, in the specified period of time (usually a 30-day billing cycle).
Here’s a simplified example:
- Business one has 10 refrigerators, but they only run one at a time.
- Business two has 2 refrigerators, but they run at the same time.
Business 2 would have a higher demand on the utility, so would get charged a higher demand rate per month than business 1.
Demand charges are based on the fact that, for the most part, energy cannot be stored–it must be generated by the utility at the time that it is needed. As you increase demand, you have to have larger power plants to accommodate that demand. So, the demand charges help offset the costs of building and maintaining larger power plants.
Other Factors in Energy Rates
The energy utility company may further breakdown energy bills into other subcategories. Some of these definitions are similar funds–going to the cost of utility construction, generation, and maintenance–but some industry regulation or best practices may require the utility to list these charges under their appropriate terms.
- Customer Charges – A fixed cost to each customer for business operations, such as administrative functions and equipment.
- Distribution Energy Charges – The cost to the utility company of delivering energy, even if you do not directly purchase the supply from them.
- Distribution Demand Charges – Based on the demand of your business or zone, this is an infrastructure maintenance line item.
- Energy Efficiency Charges (or Energy Conservation Charges or SBC/RPS charges) – These are funds collected by the utility to go toward energy conservation programs. When upgrades are done to improve efficiency, they may be funded from this program.
- Renewable Energy Charges (or Renewable Portfolio Standard, RPS) – In some states, a separate fund is collected by the utility to help develop or support renewable energy sources.
- Transition Charges (or Competitive Transition Charges, CTC) – In some deregulated states, utilities are allowed to charge customers an additional fee to help offset the costs of doing business, since they are no longer collecting the funds for the delivery of the energy.
- Transmission Charges – The fee for delivering energy across the utility infrastructure.
Taking Charge of Your Energy Bill
While some of the costs of energy, from the utility or the energy provider, may not be negotiable, others are. Additional on-site measures also help reduce energy consumption or demand–greatly reducing energy bills.
When you work with Energy Professionals, we are your complete energy managers. We specialize in energy solutions that will help you meet both your budgetary and sustainability goals.