Business Electricity Basics

Business Electricity Basics – Power Up Your Business!

You’re looking for a business electricity plan for your Texas business. But first you need to understand what you’re shopping for and how to compare electricity plans for your business. It helps to know the basics — how to tell a KW from a kWh, delivery fees vs. energy costs, and what are demand charges?  In this article, we’ll demystify the mysteries of business electricity, so you can shop business electricity rates and make the best choice for your commercial electricity plan.

This article assumes that you are familiar with electricity shopping from purchasing it for your home. Need a refresher? Check out What is deregulation? Shopping for business electricity rates is a breeze once you understand a few specific things about business electricity in Texas.

Why are Home and Business Electricity Rates Different?

Businesses and homes use electricity differently. Retail Electricity Providers (REPs) use what’s called a “load profile” for each type of customer to price electricity. These load profiles come from ERCOT (Electricity Reliability Council of Texas). ERCOT controls and tracks the flow of electricity usage in Texas.

Each load profile shows what the average residential customer or small/medium commercial customer uses during each month of the year and time of the day. Load profiles are essential to pricing since the underlying cost of electricity is dependent on the time of year and the time of day electricity is used.

Compare electric load profiles
Load profiles of homes, small businesses, and large businesses are quite different.

An electricity rate for a home assumes that 60% of usage is for heating and cooling, and that more power is used in June – August. Residential electricity rates also take into account what percentage of power is used at night when everyone is home. Compare that usage profile to a business operating Monday through Friday, 8am – 6pm. A business usage profile is very different from a home electricity usage profile, and is more consistent throughout the year and throughout the week.

What’s Unique about Texas Business Electricity Rates?

Business electricity rates are unique because you are specifically shopping for an energy rate.  The utility or Transmission & Distribution Utility (TDU) delivery rate is not included in the pricing because the TDU delivery rate is specific to the business.

Your business’s TDU delivery rate varies based on the type of meter(s) you have. And we’re not talking about smart meter vs. analog meter. We mean the meter designation of MGS, LGS, Metered lighting, non-metered lighting, demand meter, and non-demand meter.

The Public Utility Commission of Texas (PUCT) regulates the TDU delivery rate for each meter type.  These TDU “delivery rate tariffs” are outlined in a 200+ page tariff document specific to your TDU. The tariff document covers everything from residential to commercial to large industrial utility delivery rates. These tariffs are subject to change two times a year, March 1st and September 1st, with approval from the PUCT.

Because the TDU delivery charges vary based on your business’s meter designation, business electricity rate quotes are for energy only. Your electricity provider passes through the TDU delivery charges on your bill every month. As a result, the TDU delivery charges are the same regardless of who you choose to supply the commercial electricity for your business.

Compare this to shopping for electricity for your home. In Texas, advertised electricity rates for your home include utility delivery rates. You’ll typically shop for home electricity by looking at the all-in average price per kilowatt hour (kWh) at a specific usage level. That’s because the TDU delivery rates are the same for every house in a common TDU delivery area since residential meters fall under the same meter designation and have the same tariff.

What is Electricity Demand (kW/kVA)? And How Does it Affect TDU Delivery Charges?

Does your business have a demand meter? If so, your business electricity bills display delivery charges for two different usage-based components:

  • Delivery charge for the amount of electricity you use over time (kilowatt hours, or kWh)
  • Demand charge based on the amount of electrical capacity you need at any point in time (kilowatt or KW/kVA)

Both delivery charges and demand charges come directly from your TDU. Your delivery charges are easy to understand — power used in kWh multiplied by the applicable delivery rate per kWh.

Demand charges are a little more difficult. They are based on your highest usage recorded over any single 15-minute period during the month, also known as your peak demand. Basically, you are paying for your piece of the pie — the pie being the total system-wide usage that the TDU delivery company has to manage.

If you use power at a consistent rate throughout the month, your demand charge will be smaller. If your business tends to use a lot of power over a short period your demand charge will be larger.

What are types of businesses with high demand charges? Think of any company that runs a lot of equipment (A/C units, appliances, machinery, ovens) all at once. Examples include large restaurants, churches, and manufacturing companies.

TIP: If you have a demand meter, you can lower your electric bill by managing your equipment turn-on. Don’t just flip the on-switch for your equipment all at once. Set up a schedule to turn on one piece of equipment at a time, maybe every 20 minutes. The goal is to avoid turning on “everything” within a single 15 minute window. Remember ERCOT records ‘load profiles’ in 15 minute increments.

Large Texas Commercial Electricity Rates

Large businesses — those with more than 10 meters, or spending more than $10,000 a month on electricity — may have a different contract and rate structure from a small business.

Larger commercial customers can pick from fixed price options like these:

  • Fixed plan full requirements:  Energy costs and any additional costs of grid reliability are included. This is the most secure and certain way to buy energy.
  • Fixed plan with limited pass through: Energy costs are fixed, but you may have a pass through for ancillary services, such as line losses or basis, which is the cost of getting electricity at your specific location.

If you’re a large Texas business or have unique electricity needs, contact us for a custom electricity quote.

Small and Medium Texas Business Electricity Rates

If you’re a small or medium business, it’s easy to shop for electricity rates in Texas.

Have you shopped for electricity for your Texas home? The process of shopping for your business electricity is very similar.

You can review energy rates online and choose from a variety of plans and terms, including:

  • Basic Electricity (Fixed price)
  • Time of Use
  • Renewable Energy
  • Tiered Rates

Select the best plan for your business, provide information about your company, and done! REPs will run a credit check prior to initiating service just like they do with residential service. The REP will contact you for additional details to get service established or to offer energy efficiency programs for your company.

REPs should also provide an Electricity Fact Label (EFL) that corresponds to your specific meter type for business electricity customers with demand < 50 kW prior to signing a contract.

Ready to shop for your business electricity for your small business?  Let’s get started!