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Cost Saving Tips for Business Electricity Customers in PJM

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Electricity customers in the Pennsylvania Jersey Maryland (PJM) Independent System Operator territory (all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia) are starting to feel the effect of Federal Energy Regulatory Commission (FERC) Order No. 1000 issued on July 18, 2013.

The Order impacts the calculation of two of the components that comprise customers' transmission costs: Network Integration Transmission Service (NITS) and Regional Transmission Expansion Plan (RTEP). As customers adjust to the new calculation they are asking themselves, “What am I paying for and how can I reduce how much I pay?”

There are four components to the electricity grid: generation, transmission, distribution and load. In simplest terms, generation can be thought of as the facilities that produce electricity, transmission as the long distance lines that connect generation and distribution, distribution as the lines that run along the streets and into homes and businesses, and load as the electricity usage of those homes and businesses. NITS and RTEP are costs associated with building, maintaining and managing those long distance, or transmission lines.

NITS and RTEP costs are assessed to customers based on their contribution to the peak load recorded for the transmission system. Customers whose load is less during the system peak load will pay less for transmission service. It is important to note that everyone pays the same rate but that the rate is applied to a smaller transmission obligation thus resulting in a lesser total cost.

In order to reduce their transmission obligation, a customer needs to understand when a system peak may occur and how they can reduce their usage. Direct Energy assists customers in identifying when a system peak may occur through its Peak Demand Alert program. Usage reduction takes two forms: permanent and temporary.

Permanent usage reduction typically entails replacing equipment with more energy efficient equipment. Now is particularly a good time to consider installing energy efficient equipment as there are many state rebate, loan and tax incentive programs to assist customers. Temporary usage reduction typically entails a change in behavior for a relatively short period of time. Examples of temporary usage reductions include changing thermostat settings, reducing lighting levels and shifting usage from one time period to another.

Customers who take control of how much, as well as when they use electricity, can achieve significant reductions not just in their transmission costs, but also in their generation and distribution costs. 

Posted: October 15, 2013