How to read a commercial utility bill

Image courtesy Flickr user ptmoney.com

Utility bills are as complex as taxes. Focus on five key elements to manage your spend.

Complex, arcane, impenetrable, unfair. These are words most Americans use to describe the U.S. tax code.

Now imagine having to do your taxes every month. If you’re a facility professional, that’s roughly what it feels like to read your utility bills. Case in point: the federal 1040 form contains 1,400 words over two pages. The most popular commercial electricity tariff for Pacific Gas and Electric contains 6,000 words across 18 pages. No wonder customers are confused.

Thankfully, just like the tax code, most of the details of a utility bill are regulatory filler. Only a few elements are relevant to energy management. Focus in on these items to find savings.

A handy mnemonic highlights the five most critical elements of a commercial bill: (R)eviewing (B)ills (D)iligently (C)reates (P)rofit.

Let’s dive into each element:

  1. Rate. What do you pay per kilowatt and per kilowatt-hour? The answer may not be as straightforward as you think. You can roughly approximate your rate by dividing total spend by energy consumed, but to really understand how behavior drives costs, you need to map out your demand rates and use rates by time of day and season. This exercise is a pain, but understanding the incentives built into your rate structure is the foundation of energy management.
  2. Billing unit. Large facilities may have several main meters and many submeters. You should understand exactly which meters are getting billed and what load is attached to each. Because of rate structure complexity (see point 1), you need to understand and manage each billed load separately.
  3. Demand. Most commercial energy bills have a demand component, measured in kW. To start, figure out what percent of your bill is driven by demand, and how the demand component changes over the course of a year. In California, about 40% of summer bills are demand charges.
  4. Consumption: Most facility teams know how to track and manage electrical consumption, measured in kWh. As a next step, determine whether you are on a time-of-use (TOU) tariff and investigate the possibility of saving by shifting load.
  5. Programs. Demand response and other specialized programs are sprouting like mushrooms. The incentives built into these programs are often complex, but typically they are designed to save customers money when applied appropriately (many programs even come with a savings guarantee). At a minimum, you should determine which programs you are currenty enrolled in, and whether you have accepted any default program options that could be better optimized for your facility. We also recommend enrolling in any available price response program. For many facilities, these programs are easy ways to show immediate bottom line impact from energy management.

Utility bills are complex, but by paying attention to these five factors, you can learn to spot what matters most and ignore the rest.

About Tom Arnold

Tom Arnold is co-founder and CEO of Gridium. Prior to Gridium, Tom Arnold was the Vice President of Energy Efficiency at EnerNOC, and cofounder at TerraPass. Tom has an MBA from the Wharton School of Business at the University of Pennsylvania and a BA in Economics from Dartmouth College. When he isn't thinking about the future of buildings, he enjoys riding his bike and chasing after his two daughters.

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