Electricity Rates for Manufacturing Companies
Electricity for a manufacturing facility can be one of your larger overhead items.
According to the EIA Manufacturing Energy Consumption Survey (MECS) the industrial electricity sector consumes 32% of all energy in the US, much of that for manufacturing.
And within the manufacturing sector, 5 industries make up almost 80% of that energy usage. The most energy-intensive industries are: chemical manufacturing, petroleum and coal products, metals, food manufacturing and paper manufacturing.
But no matter what kind of manufacturing company you have, the commercial electricity rate you pay makes a difference in your bottom line.
Your electricity cost for your manufacturing operations will vary by:
- Whether your state has deregulated electricity
- Your load factor and demand
- Your management of your peak usage
That’s why working with a commercial energy broker for your electricity procurement makes sense.
Understanding the Electricity Bill for a Manufacturing Company
The electricity bill for your facility likely includes these three sections: Energy, Demand and Delivery. You can cut your electricity bill by controlling your energy costs and demand charges. And that’s where ElectricityPlans.com and our partnership with a leading energy consultant can help.
This is the price you pay per kilowatt hour (kWh) multiplied by your usage.
If you’re in a deregulated electricity market like Texas, Ohio, New York or Pennsylvania, you can shop for the best electricity rate for your manufacturing facility.
Cut your electricity rate for your manufacturing operations and you’ll lower your electricity bill.
This is the energy charge for the amount of electrical capacity you need.
It’s the maximum amount of kilowatts (kW) used during your highest usage during a 15 minute period within a given month. ($/kW).
Managing your peak demand can help lower these charges. Knowing when your utility measures peak demand can help you plan.
This covers the transmission and delivery of power to your business. Your local utility company’s delivery rates are approved by your state’s public utilities commission.
Your tariff and delivery fees depend on the type of meter, demand and volume of usage.
Delivery costs for a commercial electricity bill usually show all line items of the utility tariff.
How Much Electricity Does a Manufacturing Company Use?
Manufacturing facilities use 95.1 kilowatt-hours (kWh) of electricity and 536,500 Btu of natural gas per square foot each year, according to the EIA. Of course, this varies widely depending on the type of manufacturing company you have.
Benchmarking lets you evaluate your manufacturing energy performance, establish baselines and set improvement goals compared to similar manufacturing companies. You can benchmark your manufacturing facility’s energy usage with the EnergyStar energy performance indicators.
And knowing how you compare to similar facilities can help you decide if an energy audit is in order, in addition to an energy procurement strategy.
Our energy experts have worked with a variety of manufacturing companies, including organizations that produce automobile parts, aluminum, insulated foam, frozen food, batteries, printers, plastics, and more.
And we know that understanding your electricity usage and getting the best electricity rate for your manufacturing business are the fastest ways to reduce your electricity spend.
How to Manage Electricity Costs in Manufacturing Facilities
If you want to reduce the electricity bill for your manufacturing facility, here are the top 8 ways to cut costs.
- Energy Audit. Invest in an energy audit to understand your current consumption and find efficiency opportunities.
- Demand. Coincident peak management, lowering your demand when overall demand systemwide is at its highest, can lower your bill for the next year.
- Demand Response. If you have flexible scheduling, your company can get paid by reducing energy consumption during peak periods.
- Monitor Idle Equipment. Power down any idle equipment between uses.
- Lighting. Replace discolored lighting fixtures to increase lighting output by up to 10%.
- HVAC. Monitor and maintain your HVAC system to ensure efficiency and scheduling.
- Negotiate Rates. Work with an energy broker to negotiate the lowest electricity rate and compare suppliers.
- Maintenance. Routine maintenance of your equipment extends its useful life and keeps it operating efficiently.
We have worked with manufacturing companies on energy audits, coincident peak management, demand response and procurement. We can help you improve your energy management.
Predominant Use Studies for Manufacturing – Tax Free Electricity
Most manufacturers can qualify for a sales tax exemption on electricity. To qualify, you must have a predominant use study that shows that a certain percentage of the power purchased for your business is used in processing, manufacturing, fabricating, or another nontaxable use.
The percentage requirements vary by state. But qualifying for a sales tax exemption can cut 5-10% (or more) from your bill depending on your location.
Manufacturers can qualify for sales tax exemptions in Texas, Connecticut, New York, Ohio and Pennsylvania, among others.