Note: This article by Heartland CEO Mark Scheibe appeared in the June-July 2021 issue of the Heartbeat newsletter.
Do you use an electric clothes dryer? What if I told you that running a dryer for one hour could cost your cooperative almost $400 if it were used on a peak alert day, but you only would pay about $0.45 for the energy use on your electric bill?
With electricity, timing is everything.
For more than 80 years, consumption-based billing has been the standard for electric utilities, Heartland included. This means we calculate residential electric bills based on the number of kilowatt-hours (kWh) consumed – regardless of when those kilowatt-hours are consumed.
Consumption-based billing carries some advantages. It’s easy to calculate and easy to understand compared to other methods.
For instance, the average electric clothes dryer uses 3000 Watts, or 3 kW. Running that dryer for one hour would consume 3.0 kWh. If the cost per kWh calculated under consumption-based billing was, say, 15 cents, the consumer would be billed $0.45 (3 kWh x $0.15 per kWh) for the power used by their dryer.
The downside to consumption-based billing is that it obscures the fact that when electricity is consumed can be much more impactful on costs than how much is consumed.
On the wholesale electricity markets, pricing is typically much lower for energy consumed in the middle of the night than for energy consumed in the early evening hours. Wholesale pricing also varies by month and season.
These ups and downs are not normally seen by residential consumer-members, because under consumption-based billing, all of the costs are averaged out to come up with a price per kWh that is reflected on each bill.
But does this method accurately share the true costs of electricity? And under this model, what opportunity is there to reward those who adjust their usage habits for the benefit of the whole cooperative? Consumption-based billing does not allow for small changes made to timing to result in dollars saved on a bill.
One way we try to address this challenge is Peak Savers. In this voluntary, opt-in program, more than 2,000 Heartland consumer-members are alerted in advance of forecasted peak usage days in July and August and are asked to shift their electric consumption away from 3 to 6 p.m. by turning their thermostats up by a few degrees or running home appliances a little later than usual.
This helps Heartland avoid purchasing power at the most expensive times of the year, which in turn contributes to pricing stability for all consumer-members. At the end of the summer, we thank Peak Savers participants by providing a rebate of at least $1 per kilowatt saved.
Peak Savers is only the start. One of Heartland’s strategic initiatives is to find better ways for our consumer-members to control their electric costs. As the world changes, it might be time to revisit the ways our rates are structured.
Providing options other than consumption-based rates would allow consumer-members to have more control over their electric bill (if they so choose), simply by shifting when they use electricity. Look for more information on these potential new rate options in the coming months.