TVA just announced their new wholesale rate structure for 2012 and it's going to have major impacts on all the local power companies in their territory. They're moving from a traditional energy and demand charge model to a more complex system with seasonal adjustments and time-of-use components. Here in Knoxville, KUB is already talking about passing these changes through to large commercial customers starting in July. The summer peak demand charge could jump from $9.50/kW to over $14.00/kW. Has anyone else in TVA territory heard similar rumblings from their local distributors?
TVA's new wholesale rate structure trickling down to distributors
Terry, we're hearing the same thing down here in Alabama. Alabama Power is a TVA customer for some of their northern territories and they're definitely planning to restructure their commercial rates. The word is they're going to implement time-of-use pricing for all customers over 500kW starting this summer. Peak hours will be 1-7pm June through September with rates around $0.16/kWh versus $0.08/kWh off-peak. Combined with the higher demand charges, some customers could see 30-40% bill increases. It's going to create a lot of audit opportunities as businesses scramble to understand their new rate structures.
Albert, you're spot on about the audit opportunities. SEMO Electric here in Missouri gets some of their power from TVA and they're already adjusting their rate schedules for 2012. They're adding a new "Transmission Service Charge" that's $2.15/kW for all customers over 25kW demand. Plus they're changing their power factor penalty from 90% to 95%, which is going to catch a lot of industrial customers off guard. I've already got three manufacturing plants asking me to review their bills and look for ways to improve their power factor before these new penalties kick in.
Elmer brings up a good point about power factor. A lot of utilities are tightening their power factor requirements as they try to improve grid efficiency. FirstEnergy here in Ohio moved from 85% to 90% minimum a few years back, and customers who don't meet it pay penalty charges of $0.50/kVAr. For a plant with poor power factor, that can add up to thousands per month. The good news is power factor correction equipment has gotten much more affordable. Most customers can install capacitor banks for $15,000-$25,000 and eliminate the penalty charges entirely.
Jim's right about the power factor correction opportunities. Down here in Texas we see a lot of older industrial facilities getting hit with reactive power charges when utilities tighten their standards. Oncor charges $3.84/kVAr for power factor below 90%, and with the new TVA-influenced rate structures trickling through the region, I expect more utilities to adopt similar penalties. The key is getting customers to understand that power factor isn't just about avoiding penalties - improving it can also reduce their demand charges by lowering their total kVA draw.
Marcus makes an excellent point about the demand charge savings. Entergy here in Louisiana has been pretty aggressive about power factor enforcement, and I've seen customers reduce their peak demand by 10-15% just by installing power factor correction equipment. At current demand charges of $12.50/kW, that 10% reduction can save $15,000-$20,000 annually for a 1000kW customer. Combined with avoiding the reactive power penalties, the payback on capacitor banks is usually under 2 years. It's one of the easiest wins in the utility audit business.