Utility analysis is critical for identifying cost-saving opportunities in manufacturing energy assessments. It involves understanding your energy bills, identifying trends, and pinpointing inefficiencies.
Types of Energy Bills
Manufacturing firms typically encounter these types of energy bills:
- Electricity: Powers machinery, lighting, HVAC, compressed air systems, refrigeration, and office equipment.
- Natural Gas: Commonly used for heating, boilers, process heat, ovens, and drying processes.
- Propane: Often used for heating, forklifts, portable heaters, or remote equipment in locations without natural gas infrastructure.
- Fuel Oil: Used primarily for boilers, heating, backup generators, or industrial furnaces, especially in locations without natural gas access.
Overarching Recommendations
There’s a few recommendations that are broadly applicable across many different types of energy bills.
1. Pay Bills on Time
- Avoid late fees, which can typically range from 1% to 5% of the total bill.
2. Review and Switch Rate Plans
- Many utilities offer multiple rate structures such as time-of-use (TOU) or demand-based tariffs.
- Calculate potential savings by comparing your current bill with hypothetical scenarios under alternative rate structures.
3. Third-party Energy Suppliers
- Third-party suppliers might offer competitive energy rates compared to your current utility provider.
- Request quotes from alternative suppliers to compare pricing.
4. Tax-free Status
- Many manufacturing firms are eligible for state sales tax exemptions on energy use.
- Typically, these taxes range from 3% to 10% of energy costs.
Power Factor Correction
Power factor (PF) measures the efficiency of electricity use, specifically the ratio between real power (used to perform actual work, measured in kilowatts or kW) and apparent power (total power supplied, measured in kilovolt-amperes or kVA). A lower power factor indicates inefficiency, causing utilities to impose penalties (usually below a threshold like 0.90).
- Ideal PF: Typically above 0.90 (or 90%).
- Poor PF: Below 0.90 may incur additional charges from utilities due to higher current draw and reduced grid efficiency.
In order to improve power factor, we generally recommend installing power factor correction equipment such as capacitors or capacitor banks, optimizing equipment use, or upgrading inefficient motors.
For a more technical introduciton to power factor, check out this video:
How to Perform Utility Analysis
Effective utility analysis follows these general steps:
- Import Data into Excel
- Gather 12-24 months of energy bills.
- Enter bill data into Excel, including:
- Billing period dates
- Total consumption (kWh, therms, gallons)
- Peak demand (kW for electricity)
- Total costs and any itemized charges (fixed charges, demand charges, etc.)
- Calculate Average Rates
- Calculate the average electricity rates:
- Average electricity consumption rate ($/kWh) = total cost ÷ total kWh consumed.
- Average electricity demand rate ($/kW) = total demand cost ÷ total billed peak demand.
- For natural gas, propane, and fuel oil:
- Average cost ($ per therm, gallon, or unit) = total cost ÷ total consumption.
- Calculate the average electricity rates:
- Graph Data and Analyze Trends
- Create visualizations, such as monthly consumption, costs, demand, and rate trends.
- Identify seasonal fluctuations or irregular usage patterns indicating inefficiencies.
- Look for Recommendations
- Evaluate trends for anomalies, spikes, or inefficiencies.
- Identify potential cost-saving opportunities, such as the ones mentioned above
More Information
This video is a part of the IAC 101 series by Mike Muller. It provides more i-depth coverage of the topics discussed here.
In CT, there’s a “competitive” electricity market. This effectively means that instead of the governemnt regulating energy prices as closely, they take steps to enable competition for electricity generation. Since electric delivery is a natural monopoly, that is still regulated heavily through government-approved rate tariffs.
Eversource Commercial Rate Tariffs
Also, take a look at this explanation of what different things mean on an Eversource bill.
Eversource Understanding Your Bill
I use eversource here as an example because that’s what the majority of our clients use. However, other companies generally have similar versions of these resources if you google hard enough.
Activity
Using the data at the link below, conduct a utility analysis (I did step 1 for you). Then, calculate the average kW, kWh, and MMbtu rates. Note that the data provided is in CCF, so you will have to convert units. Finally, identify which recommendations would be relevant for this company and identify the corresponding ARC codes.
Quiz
1. What's the kWh rate for the company in the activity? Provide your answer without the dollar sign and rounded to the nearest cent.
2. What's the kW rate for the company in the activity?
3. What's the main reason the kW rate is so high?
a. They operate in a place where electricity is expensive
b. They have a low power factor
c. They are on an incorrect rate tariff
d. None of the above
4. Which ARC code isn't applicable for the company?
a. 2.3212
b. 2.8121
c. 2.8123