How much can you influence the charges in your electricity bill?
Electricity bills should be simple. After all, electricity itself is a simple concept to most of us. Plug in, turn on and presto.
Unfortunately, the energy market which governs what we pay is complex. This complexity translates to the energy bills. Bills that arrive regularly and are an increasing cost for most businesses.
In the year to December 2018, the number of small businesses disconnected for non-payment rose 36%. The average debt rose 31% for the same period. We could blame it all on the rising cost of energy for use. However, many businesses are not making the most of energy efficiency. For example, LED lighting only makes up 35% of all lighting fixtures being in Australia.
To understand where you can save, you need to know what charges go into making up your bill. And, what you can do about each of them.
Bill shock or bill ignorance?
Energy bill shock is not a new concept. Especially in the modern era of rising energy prices. This increase in prices affects everyone from residential through to large business. More businesses are finding it difficult to navigate the increased costs.
We thought we would take the time to share a simple view of the parts of your electricity bill. We will also share how much you can influence the various aspects to reduce your energy bill.
What do you pay for?
As a business user (and it depends on how much you use), there are several charges you can incur that makeup part of your bill:
Usage – The actual energy that you use to power your lighting, cooling and equipment. This is the c/kWh charge you pay.
Network – The cost for the energy networks to deliver power to your premises. This is dependant on your location and the cost for energy delivery to your location.
Environmental – Government levies which are a mix of federal and state. Some of these levies go to fund energy efficiency and solar initiatives. Everyone has to pay these charges. Many businesses are eligible to claim some back through funding.
Demand – The charge for how much energy your business requires to run. It varies based on the type of business you have. Heavy machinery, heating and cooling, and, other equipment impact this.
Aren’t usage and demand the same thing?
While these two charges may seem the same, there is a difference. One (usage) is the charge for the electricity that you actually use. Demand is a little more complex.
Many items of machinery and lighting need more energy to switch on than they use when running. It is like when you drive your car. The harder you speed up, the quicker you reach the speed limit. But your fuel consumption to get to the speed limit is higher than if you speed up slowly. Once you reach the speed limit, the fuel used to maintain speed is lower than the amount to get there.
Certain types of devices also operate on DC power (such as your phone charging). The charger/transformer converts power supplied into power that the device can use. While a device may need only 10kW to run, its transformer may need more than this to convert from AC power.
The difference between actual usage and the amount needed to operate is its power factor. Thus the energy company may need to supply more power to your business than it consumes. But, it still places a real demand on the electricity network. And it costs money.
That is you may be charged for both usage and demand. Demand charges can penalise you for inefficient machinery, lighting or other factors.
So what can you influence?
If you look at the table below, you will see what you can do about various parts of your bill. This is a general guide and should provide a starting point. Each business is different and if you have any questions, please get in touch.
Better efficiency means a better environment
For many businesses this is not only about money. We all want to play our part in reducing our impact on the planet. Reducing energy use is one of the ways we can all make a difference. The best part is that it not only helps reduce our impact but it also helps reduce cost.
Improving energy efficiency is the most cost effective way to reduce your energy bill. It also delivers an immediate return on investment. It is worth taking another look at LED lighting, Power Factor Correction or even the appliances you have.
Start by doing something
Sitting around and complaining about costs will not reduce your bill. Calling up and getting a better c/kWh rate will deliver small savings but is not likely to make a major impact.
Every business leader should be looking at their options now. If you have looked before, then look again. The higher energy price and advances in technology have changed the ROI equation.
Even if there is little you can do to be more efficient. Even if there are no options. You at least have ruled out those options and can go back to complaining and feel justified by it.