When time is money
With rates on the rise, when you use energy
can make a difference in the price you pay
Aug. 15, 2007, dawned hot and muggy in Missouri. For most of the state, the temperature never dipped below 70 degrees overnight. By 2 p.m., the temperature reached 105 degrees and stayed that way through the evening, as recorded at Columbia.
For most electric cooperative members lucky enough to have one, the air conditioners never stopped turning. Electric meters spun faster than ceiling fans as employees of Associated Electric Cooperative watched the growing load on the electric cooperative grid edge toward a new record.
That record energy use happened around 6 p.m. as the day’s high temperature topped out just as most people got off work and started their evening chores. Now lights, stoves, microwaves and water heaters added to the demand for electricity.
For the third time in the summer of 2007, Associated Electric set a new peak for electricity usage, moving 4,248 megawatt-hours of electricity to member systems in Missouri, Oklahoma and Iowa. That followed a trend from 2006 when electric cooperative members also set three new record peaks in July of that year.
The trend is something Associated CEO Jim Jura has been following for many years. The new peaks are just one factor driving electric rates to higher levels.
“The system is growing,” Jura says. “And it’s growing faster than we thought. One of the fascinating things about our business is we don’t know how much load is out there. The only time we can measure that is when we have these extreme conditions.”
When peaks occur like they did this past summer, they tell Associated’s forecasters whether their planning numbers are accurate or need to be adjusted. That’s important because the generation cooperative based in Springfield is tasked with ensuring there will always be electricity when members need it, even on the hottest or coldest days of the year.
The good news from the Aug. 15 peak was that the system functioned as designed, and members had all the electricity they needed to cool their homes. The bad news is during these peak conditions the cost of generating electricity increases dramatically, which will ultimately show up on members’ bills.
A look at the market for electricity on that hot August day shows that it costs much more for electricity based on the time of day. At 5 a.m., when most people were still asleep, the market price for a megawatt-hour of electricity was $37.03. By 6 p.m., when the peak occurred, it would have cost $110.46 for that same electricity.
Those prices reflect what it would have cost Associated to buy electricity instead of generating it. But the cost for generating power follows a similar trend. At 5 a.m., most of the electricity that co-op members need can be provided by low-cost coal-fired power plants. At 6 p.m., plants fueled by higher-cost natural gas must be added to the mix.
|The peaking unit installed at Essex in southeast Missouri can be started and stopped quickly to meet power needs. However, such units are more expensive to operate.
One of the first things Jura did when he took the helm of Associated Electric in 1991 was to ask his board for permission to build a series of peaking units. Several simple-cycle units, basically jet engines attached to generators, were installed at Essex in southeast Missouri, Holden in west-central Missouri and Maryville in northwest Missouri. These units can be started and stopped quickly to meet peak power needs.
“They are built for peaking and they are not very expensive to build, but the cost of the fuel is high,” says Jura. “But we don’t use them very often. In some cases, like the summer before this one, we didn’t use them much at all. But they have to be there to meet the load because the members, when they flip that switch, they want the air conditioner to be there.”
The most expensive plant on the Associated grid to operate is an oil-fired unit located at Unionville. That plant might operate for only a few hours a year. But when it’s needed, it’s one of the most valuable assets electric cooperatives have. Without its power added to the mix, Associated would have to buy energy from the open market at much higher rates.
No matter how much they cost to operate, these peaking units are priceless on days such as Aug. 15, 2007. But for years, officials at Missouri’s electric cooperatives have known the best scenario is to keep these peaks as low as possible.
Electric cooperatives have always encouraged members to use electricity wisely, and that means not using major appliances during hours of peak demand. Those peaks typically occur in the morning as people prepare for work and in the evening when they return home. By not running the dishwasher during peak hours, for example, co-op members can help reduce the peak.
During the energy crisis of the 1970s, electric cooperatives ran “Peak Alert” radio and TV messages to ask for members’ help. More recently, cooperatives have turned to technology to cut the peak.
At Farmers’ Electric Cooperative, based in Chillicothe, members can opt into a program that uses radio-controlled switches to turn off water heaters and air conditioners for brief periods when peaks might occur. A signal from a computer at the co-op’s office travels by radio to the substations, and from there goes over the power lines to a switch in the members’ homes.
Essentially a jet engine, the peaking unit at Holden in west-central Missouri provides energy when demand exceeds supply from other power plants.
“We still set a peak,” Farmers’ CEO Mike Sanders says of the Aug. 15 date. “But it would have been much higher had we not been controlling it. It saves us money by keeping that peak down as much as we can.”
And that, in turn, saves members money because the bill your electric co-op pays is based in part on how much demand there is on the system.
On days when the demand for electricity is high, consumers have a great opportunity to help. A task as simple as setting the timer on the dishwasher to run late at night or changing the thermostat one degree warmer or cooler can make a huge difference.
“These peaking units are priceless,” Jura says. “But in general, if we can get our members to use electricity more efficiently, we will all be better off. Because if they can use less of it and we don’t have to generate it over those high peaks, we experience lower costs.”
Missouri’s electric cooperatives have an energy efficiency committee working on a plan to help members do just that. Look for more details in the coming months.
Jura believes that by taking steps to use electricity more efficiently, members can help to hold their costs down. “There’s a lot of ways to save electricity,” he says, “Even with lighting, you can save a lot.“