Commercial property and business owners have recently reported getting higher electricity bills than usual, an occurrence they seem unable to account for. As their day-to-day activities rarely vary, they can easily anticipate the amount of electricity they will use in a single day, week and month. If there seem to be no fluctuations in usage, how come the bill is higher, some may wonder. What they fail to realize is that, in addition to electric usage, there are other two things to account for: electric delivery and time of use, both of which influence the overall charge.
Failing to understand the electric bill is at the root of the problem for commercial customers. More specifically, it’s failing to understand the delivery demand charges.
What are demand charges on a commercial electric bill?
SDG&E calculates the highest amount of electricity delivered to a business at any given time. In other words, this amount is comprised of peak usage instances, all of which make up the demand charges. Or put simply, it’s the highest amount of electricity the utility will need to deliver to your business.
To understand demand charges, a commercial customer must also understand the concept of baseline allowance. The baseline allowance is the amount of electricity measured in kilowatt hours for which customers pay a minimum delivery charge. If more electricity is used than indicated by the baseline, the electricity is delivered at a higher rate.
In other words, customers pay for the amount of energy used (measured in kilowatt hours), and the rate is determined according to the time of usage. Unfortunately for SDG&E customers, there’s been an increase in rates between 2017 and 2018, in addition to other adjustments to minimum charges and the tier system.
On top of it, a demand charge is often seen as an additional fee that a customer has to pay for electric delivery (which is not the same as usage). However, a demand charge appears only if the utility had to deliver a spike of energy to a business that is outside the business’s “normal” usage.
Why do so many businesses see higher electric bills?
In addition to the aforementioned changes, the increases in electric bills are influenced by a business’s inconsistency with energy usage. The inconsistency is far from new, but it’s become more noticeable now that it influences the electric bill charge more.
If you’re not consistent with electric usage, it means there are spikes in usage reflected in the higher delivery demand charge. You can expect a higher demand charge if you:
- Run the AC more than usual
- Leave the AC running off hours or at the weekend
- Turn on additional lights that you don’t actually need
- Run multiple machines/equipment at the same time (and you normally wouldn’t)
The fact is – these have caused higher bills before, but with the demand charge being added to the actual usage charge, the spikes incur an even higher electric bill.
How to reduce your demand charge?
First and foremost, businesses should eliminate the spikes in usage. For example,
- Always turn the AC off when there’s nobody in the office
- Make sure your employees shut down the computers at the end of each workday
- Invest in energy-efficient light bulbs
- Install better insulation and darker blinds to keep the office naturally cool
These suggestions should be applicable to the majority of businesses, at least those that involve employees working on computers in an office.
In addition to being clean and friendly to the environment, a commercial solar system can help you reduce demand charges, and the electric bill as a result. As an SDG&E customer, you should know that the utility is likely to impose higher charges as an incentive to customers to save energy. SDG&E is aware that more and more customers are going off the grid, and is working to adapt to the changes.
Why are so many customers going solar?
Because it’s a great investment, especially for smaller businesses looking for ROI. What’s more, as electric rates go up, the price of solar is going down with each passing year.
As regards the demand charges, you can switch to solar during peak usage hours or when you know you’ll be using more electricity than usual. Get off the grid in these situations, and you’ll eliminate spikes in energy usage that lead to higher demand charges in the first place.
Who to call?
Action Solar is your go-to solar installation, repair and maintenance company. We don’t disrupt your daily activities during installation, and provide various incentives for going solar. We are serving SDG&E customers and keep up with the latest changes. Contact us today to see about the best solar options for your business that will help you go green, save energy, reduce delivery charges and monthly bills!