This is part one of a three part series on reducing electric bills for businesses. Part one deals with identifying errors on your utility bills. Part two will help determine which of the existing utility rates is best for your business. Part three will look at the potential benefits to business from deregulation.


Electric bills. We pay them every month. We assume they are correct. After all, they are generated by a computer and computers don't make mistakes. However, there is a significant human element in producing your electric bill and humans do make mistakes.

Many types of errors are possible on electric bills. Two that can result in large over billing are: 1) incorrect demand readings and: 2) incorrect meter constants. There are ways to identify these errors on your bills.

According to Brian Coughlan, PE, President of Utility Management Services, Inc. in Wilmington "Businesses can save a lot of money by ensuring there are no errors on their electric bills. Four out of five commercial or industrial customers are over billed by the utility at some point". If you aren't familiar with how to look for errors, there are companies who will do it for you.


CHARGES ON YOUR ELECTRIC BILL

Commercial electric bills have two basic types of charges: demand charges and energy charges. Each contributes significantly to your overall bill. It is important to understand the difference between these two-terms.

Energy usage is measured in kilowatt-hours (kwh). The kWh reading shows up on your bill every month.

Demand charges are based on the peak demand set during any period during the month. Demand is measured in kilowatts (KW) and is on your bill every month.

Peak demand is a measure of the maximum rate of energy usage at a business during any 15 minute period of the month. The peak demand is established when the maximum amount of equipment is running concurrently. This frequently occurs on very hot or very cold days when air conditioning or heating equipment is running.

Running ten motors for 15 minutes and shutting down the business will set a peak demand that is ten times higher than running one motor continuously the entire month.

Energy charges are based on the total amount of energy used during the month. The total energy used depends on how much equipment was running and how long the equipment ran. Running ten motors for one hour will use the same energy as running one motor for ten hours.


INCORRECT DEMAND READINGS

Utilities occasionally make mistakes in calculating the demand for a business.

These are most commonly due to an error made by the meter reader.

Meter readers perform their work in all weather conditions with many distractions from barking dogs, traffic, bee's nests, etc. On the typical commercial meter, the meter reader must correctly read eight or more dials.

If the meter reader reads your demand incorrectly, or a typographical error is made when the reading is entered into the billing system, your bill will be wrong. If the demand is wrong one month, it can cause over charges for 12 months. This is because many utility rates contain a "minimum billing demand" clause that requires the customer to pay each month for a percentage of the highest demand established during the year.

For example, assume you normally have a peak demand of 60 KW. Due to a meter reading error, you are billed for 100 KW this month. If you are a CP&L customer, you may be billed for 80 KW for the next 11 months even if you only use 60 KW. If you are a Duke customer, you may be billed for 100 KW for the next 11 months even if you only use 60 KW.

To identify demand charge errors, watch your bills closely every month. Read the KW or demand portion of the bill. Compare the actual KW shown on the bill to the billing KW. If there is a difference, there may be an error and an opportunity to receive a refund.

According to Coughlan, "Maintaining a graph of peak demand over time can be helpful. This allows customers to see when there are unusual spikes in demand that may be caused by errors."


METER CONSTANTS

Electric meters for most businesses do not measure all of the energy that is used by the business. Instead, the utility uses instrument transformers to send a signal to the meter to indicate how much energy has been delivered. The utility then uses a meter constant, also known as a multiplier, to determine the actual usage.

The meter constant is established when your meter is first installed. It is a function of the type and size of instrument transformers at your facility and how those devices are connected. For example, assume the following for your business:

Meter constant= 80

Actual usage = 80,000 kWh

In this case, the meter would register 1,000 kWh. The utility would multiply this reading by the constant of 80 to determine the total usage of 80,000 kWh. If the constant for your meter was calculated incorrectly, or entered into the billing system incorrectly, then your bill would be wrong. For example, if your meter constant should have been 40, then your actual usage would have been 40,000 kWh rather than the 80,000 kWh for which you were billed. Errors of this type are very hard to find. This is because the error occurs on every bill you receive from the utility. Therefore, there is not a spike or unusual change in usage that occurs in only one month.

One way to find these problems is to determine the capacity of your main electric panel. An electrician or engineer can help with this. Then, check your bills to ensure that you aren't being billed for more KW than your equipment can handle. Ask your power company what size transformer serves your business. If the demand on your bill ever exceeds the power rating on the transformer, that is a sure indicator of an error.


BILL AUDITING SERVICES

If you want to ensure there are no errors on your bills, but don't have the time or technical inclination to perform a thorough review yourself, consider hiring a utility bill auditing company. These companies will review several years of your old bills, as well as your ongoing bills, to ensure there are no overcharges. In some cases, they obtain the billing data directly from the utility, making it easy to take advantage of these services. According to Michael Murray, Sales Representative with Utility Management Services, "Most utility auditing firms operate on a contingency basis. If they don't provide refunds or cost savings, the service is free. Therefore, the customer's total cost can go down, but it can't go up."