Disclaimer: The identity of the business used as a real example below has been concealed for privacy purposes.
The Chamber has received a few notes from business owners concerned over the recent, rapid increase in the electric portion of their utility bill. Here is an example from one of them, a small manufacturer, I’ll refer to as “Business A” whose email read as follows.
“Has there been any discussion or comments made in regards to REU upgrading many small businesses from E2 (small commercial) to E7 (large commercial) Utility users? My bill for June 2022 increased from $178.00 to $1004.00 for the same amount of Kilowatt Hours (kWh). Are there any other businesses affected by this? We must get together or be put out of business.”
The cause for anxiety in this particular situation is that it is predicted, based upon previous energy usage as well as the way energy is being used by the business, the annual cost of electricity will increase from roughly $1,500/year to $9,500/year. The reason for this dramatic increase is mostly a result of a change in how some commercial customers are being charged for what is called “peak demand”.
In an email to a commercial customer, an REU official stated, “(Peak) demand charges are driven by the highest 15-minute interval of kW (kilowatt) power draw (max capacity) of the entire month. Any of our current small commercial accounts that meet or exceed a demand of 25 kilowatts (kW) six times or more within 12 months is being moved to our large commercial rate.”
Said another way, if a business such as a manufacturer sees its energy demand peak six or more times a year for at least a 15-minute interval, when all of its machines are operating at once for example, and the rest of the time the energy demand is relatively low, they are being moved from a small commercial rate class to a large commercial rate class. This comes with it a Demand charge of $20/kW and an increased network access charge from $30 to $145/month. One potential saving grace is that the energy cost is reduced from roughly $0.17/kWh to $0.10/kWh. In reality, this energy cost savings only counteracts the other increases for those commercial customers who are more efficient users of energy, meaning they have a high “load factor”. Unfortunately for “Business A” (referenced above), it has a low (poor) load factor, and is an inefficient user of energy. In other words, they have a high peak demand (kW) and low energy usage (kWh) overall so they do not make up the difference with the lower energy cost of $0.10/kWh.
Part of the frustration voiced by each business owner that contacted me at the Chamber is that this steep increase has come as a surprise to them. An REU official reminded me that the Redding City Council approved this new rate classification structure and methodology in 2017, but, as we know, a lot has happened in our community and the world since then.
REU officials say there are options for businesses who find themselves in a hardship over a reclassification. “When commercial customers transition from one commercial rate to another, we reach out and offer education and site visits by staff to share demand management mitigation measures (staggering usage of equipment, lighting upgrades, etc.) that can improve their operating efficiency and lower their overall energy costs,” they said. “In addition, we are placing holds on accounts where the customers indicate they can make changes to reduce their demand. Unfortunately, some customers have no ability to change their load characteristics.”
This is a case of winners and losers. Some businesses who have been moved to the large commercial classification are seeing little financial impact. Some may actually see their electric bill decrease. That being said, I have been told that there may be as many as 100 or so businesses that could be “significantly adversely impacted” by these changes. If that is true, it is my opinion that the utility should take time to consider some of the unintended consequences of this new rate structure for those businesses, particularly those who do not have the ability to reduce their peak energy demand or “change their load characteristics”. It makes sense that a fair and equitable strategy be taken regarding how to charge a customer for its energy needs. However, it does not make sense for a business to be dealt a 500% increase in its monthly electric bill with little or no advanced notice. I doubt that was the intent of the City Council’s approval five years ago. Also, while it is never a good time to raise costs, many businesses are currently dealing with the impacts of inflation, supply chain, workforce, and a looming recession at this time. Perhaps it would make more sense to “hit the pause button” and reconsider how to lessen the economic impact on local businesses who are facing steep, unexpected increases.
In an effort to further advocate for our local business community, the Chamber is working with REU to schedule a workshop for local business owners to learn more about this rate reclassification and ways to mitigate potential adverse impacts. We will release more details on this workshop in the near future.
Finally, as I am finishing this column, I am pleased to let you know that the owner of “Business A” reached out to me to say they have been refunded the difference in their most recent utility bill and have been granted a two-month grace period to make changes to reduce energy demand. If you have noticed a reclassification of your commercial utility account and believe you can reduce your peak demand, be sure to contact REU by clicking HERE. For the web page detailing the revised rates and fees structure click HERE. No matter what, I have been told that REU will consult with any of its commercial customers to help them understand the recent changes.
Jake Mangas
President & CEO
