The Caribbean Utilities Company and its overseers the Electricity Regulatory Authority are in talks to change the way the utility charges commercial customers, implementing a scheme called “demand billing.”
The plan relies on peak power demand during any given month, charging customers according to their maximum usage.
While no introductory date has been set, CUC has already completed the installation 28,000 “smart” meters, which track hourly consumption of electricity. The meters enable users to manage their use of power, and the utility to track when and how much power it dispenses.
ERA Managing Director Charles Farrington told the Cayman Compass last month that “CUC and the ERA remain in discussions about possible changes to the current billing rate structure.”
“Any final changes to this structure are expected to be revenue neutral to CUC,” he said, seeking to allay fears of a rate rise, “and will be communicated to customers well in advance of implementation.”
“As we have stated before, with the rollout of our new AMI [Advanced Metering Infrastructure], the company is now in a better position to review additional rate options,” Mr. Farrington added, explaining “there are several benefits to demand rates, including providing customers with the ability to reduce their bills by lowering their peak usage.”
He was echoed by CUC spokeswoman Pat Bynoe-Clarke, who confirmed “CUC and ERA are having discussions on the subject [of demand billing],” but declined to say more: “On completion of these discussions, I will be in a better position to provide further information.”
Demand billing is based on the highest 15-minute average consumption of electricity recorded on the smart meter within a given month, and is often linked to “time of use” charges, also being contemplated by CUC, in which power is less expensive when used during off peak hours. An simple example might be doing a load of laundry to 3 a.m. instead of early evening.
Utilities often justify the move to demand billing by pointing out they are obliged to maintain expensive infrastructure – generators, transformers, substations, transmission and distribution grids – adequate to meet peak demand. CUC, for example, in early June commissioned two new diesel generators, costing $85 million, designed to serve for 25 years.
Jim Knapp, managing director of solar-installation company Endless Energy, described the scheme as “very simple really …. There are typically percentage increases in the rate depending on your consumption during a given month. As an example, I could say that my average energy consumption for 29 of the 30 days in a month was 50 kilowatt hours and if that held for the 30th day, my rate would hypothetically be $0.25 per kWh. However, if on the 30th day I used 60 kWh for five minutes, the entire month would be charged at the 60 kWh demand rate of $0.30 per kWh.”
Demand billing is in place already in a number of other jurisdictions, including: Victoria, Australia; Ontario and British Columbia; throughout Japan, Holland, parts of New Zealand, Sweden, Finland, Denmark and Norway, Spain and the U.K.; and at least six U.S. states. Last month, the German government mandated nationwide use of smart meters.
The ERA suggested the change in Cayman would likely be limited to major commercial customers.
“There are no plans to introduce demand rates for the residential class as a whole,” Mr. Farrington said. “ … [M]ost jurisdictions leave residential customers on energy-only rates as their demand profiles tend to be similar, although it can be argued that demand rates are the more equitable manner in which to distribute costs.
“Demand rates are more appropriate for large consumers, such as our ‘large consumer class,’ where demand profiles are more varied and have a more significant impact on generation and T&D [transmission and distribution] resource demand,” he said, meaning commercial customer, such as The Ritz-Carlton, Grand Cayman or Foster’s Food Fair, for example, that consume more than 30,000 kWhs per month.
By law, CUC can seek a rate increase only once per year, on June 1, and only in accordance with a complex formula based on the consumer price index in both the Cayman Islands and the U.S. Diesel costs are passed through to consumers, varying according to world-market prices.