Working on a rate analysis for a Memphis manufacturer currently on MLGW's GSM rate (secondary service). Load averages 1.8MW with pretty steady 0.94 power factor. MLGW is offering their GPM primary rate with 7% demand discount and 4% energy discount if they install customer-owned transformers. Problem is the math shows break-even at over 4 years due to transformer costs ($240k) and higher facility charges. Are these voltage discounts getting less attractive as transformer prices have increased?
MLGW Secondary vs Primary Rates - Math Not Adding Up
Bobby - transformer costs have definitely inflated faster than voltage discounts have improved. Back in 2015 that same equipment might have been $160k. Plus you've got the power factor issue - MLGW's GPM rate has stricter PF requirements than GSM. Below 0.95 PF reduces your voltage discount significantly. Factor in capacitor bank costs too.
Randy - good point about PF requirements. Capacitor bank would add another $35k to get them to 0.98. At that point we're looking at $275k total capital for maybe $45k annual savings. The client is better off staying on secondary service unless MLGW improves the discount structure or transformer costs come down.
Update - talked to MLGW about their discount methodology and learned something interesting. They're considering a tiered voltage discount based on load size. Customers over 2MW might get 10% discounts starting next year. That would change the economics significantly for this client.