Tips on How to Lessen your Energy Distribution Charges

national grid delivery charges more than usage

When you look at your electric bills, you may have noticed the electricity delivery charges that are included every month. We often have questions about what these charges are and why they are so high. While electricity delivery charges are part and parcel of receiving electricity from the grid, there is a real possibility that you might be paying more than you should. Read on to learn all about these costs and how you may be able to reduce them to lower your monthly electric bill.

What Are Delivery Charges?

Electricity delivery charges are the fees that you must pay the utility company for servicing and delivering power to you. The energy grid is managed by a utility company, which is also known as the Transmission and Distribution Utility (TDU) or Transportation Distribution Service Provider (TDSP). This company services and maintains all the equipment that facilitates electricity distribution from the generation source to the commercial or residential customers.

Electricity delivery charges are also known as demand charges, pole, and wires charges, or transmission charges, and they are billed by the TDSP. The demand charges are made up of distribution, transmission, and transition charges.

These fees are associated with the peak or maximum electricity demand on your electric meter. Put another way, delivery charges are determined by the highest volume of electricity you may require at any given point in time. This differentiates demand charges from what you pay for actual consumption.

It’s very helpful to understand the difference between electricity demand and consumption. Demand is measured moment by moment in kilowatts, whereas consumption is about how much electricity you use in a given timespan measured in kilowatt-hours.

For example, imagine a situation where the electricity demand in a certain area experiences a sudden surge. The utility company has to respond quickly to meet this peak demand, which will drive up the costs of distribution, transmission, and transition. Included in the total delivery charges, there are also some fixed components such as metering charges.

Calculating Delivery Charges

Every utility provider has a rate tariff, which must be approved by the state’s Public Utility Commission (PUC). It is this rate tariff that is used to calculate electricity delivery charges. Naturally, what you pay in TDSP charges will be affected by which utility provider you are under. To provide an example of rate tariffs, this resource shows a breakdown of rate tariffs for Texas residents who use power from AEP Central.

Reducing Your Electricity Delivery Charges

Many households are currently paying more for their electricity delivery charges than it needs to be. Let’s explore some of the options you could apply to your home to help you lower your demand charges.

Check for a Faulty Meter

A faulty meter can drive up your delivery charges because it may fail to read electricity metrics accurately. When energy consumers move from an analogue meter to a SMART meter, the former might not have been reading electricity demand and consumption correctly. This would explain the drastic change after making the switch. To address the issue, ask your utility provider to check whether your meter is faulty.

Take Advantage of TOU Rates

There are peak times of the day that are associated with higher energy use and therefore higher demands. With the Time-of-Use (TOU) rates, what you are charged for electricity consumption depends on the time of day.

You can lower your energy charge and electricity bills when you use more electricity during off-peak, low-demand periods. It’s a good idea to get a hold of your local rate structure and use this to determine how best to space out your energy consumption.

Review Your Load Profile

Knowing about TOU rates and how your home or business uses electricity throughout the day is essential if you want to reduce your demand charges. Your fees could be high if you have very high spikes in your demand during certain peak times.

To reduce demand charges, you can have a look at the load profile of your facility. To simplify this process, it might be worthwhile to sign up for a load control program that would monitor your electricity usage and pick up trends within each billing cycle. Find out which program your electricity company is using and get started.

Practice Energy-Efficiency in Your Electricity Usage

The tips above have touched on analyzing and changing how you use electricity in your home and business. Inefficient use of energy is a major cause of high demand charges. One solution would be is to change how and when you use your equipment in your facility.

It could be that you power your HVAC system and some heavy-duty machines at the same time. Having all of this equipment running simultaneously could result in a high demand charge compared with if you were to maintain the same amount of energy use throughout the day.

To be more energy-efficient, consider turning on various electrical systems and equipment slowly and not all at the same time. It could also be worthwhile to have your HVAC checked regularly to ensure it is operating as efficiently as possible.

Consider Cheaper Energy Alternatives

When you rely on electricity from the grid, you are always subject to demand charges from the electricity provider. One way to lower these costs would be to look at alternative energy sources.

Solar energy can provide all or some of the energy requirements of your home or business. When you substitute this local electricity generation for some of the energy from the grid, you can lower what you pay the utility company for delivering electricity to you.

Along with installing solar PV, it’s also worth considering investing in energy storage solutions. These can be used to store excess solar energy.

Another option would be to store electricity from the grid or even charge your electric vehicle when it is cheaper during those times when there is less demand.


Is Time of Use Metering Worth It?

Time of use metering gives a consumer the option to save money and reduce their electric bill. Charges are higher during peak demand hours, so energy consumers who can use less energy during these times will save money.

Why do electric companies charge a delivery fee?

Delivery fees or demand charges are the portion of the electric bills that the electricity provider bills for the costs of transmission and distribution to the final delivery point as well as the repair and maintenance of power lines and other transmission equipment.

Final Thoughts

Demand charges are a necessary part of the total cost of an electric bill, but you may also be paying more than you should. There are several reasons why this could be the case, but there are also some sure ways to lower these fees and save money including understanding your rate structures and the peak times for energy use.

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