The Caribbean Utilities Company this month will announce a new system of costs called “demand billing,” charging customers according to their highest electricity consumption every month.
The new system will initially target CUC’s 135 largest commercial customers, but potentially expand to include residential clients after a phased introduction starting later this year and lasting three years.
As of Dec. 31, 2016, the company boasted 24,429 residential customers and 4,249 commercial clients.
More immediately, however, demand billing is expected to boost CUC’s Consumer Owned Renewable Energy program, promoting private, individually owned solar- and wind-generation systems, and boosting use of battery storage to smooth out sudden jumps in consumption.
“There is a Demand Rate program under discussion with OfReg [the Utility Regulation and Competition Office] that will be applicable to large commercial customers and could also be used for new CORE-type customers,” Sacha Tibbetts, CUC manager for engineering services, said.
CUC has not announced a date to introduce the scheme, although rate changes have traditionally been implemented on June 1.
To date, CUC has limited residential CORE systems to 20 kilowatts and commercial installations to 100KW.
Once the new rates have been determined, they “will be introduced to large commercial customers and will be offered as an optional rate for customers wishing to have renewable-energy systems on their premises,” Mr. Tibbetts said.
“If a CORE customer can use their system to reduce their demand on the system reliably, they could get a further reduction in their bill over and above the offset of fuel costs.”
He said “there is not a plan at this time” for the utility to make demand billing obligatory for residential clients.
The company says the new system will be “revenue neutral,” leaving CUC coffers unaffected, although OfReg has not agreed to the utility’s rate proposals, and private-industry representative the Cayman Renewable Energy Association says viability of the new system depends on the charges.
“Whether or not they are viable depends totally upon the rates which the regulator approves,” said Cayman Renewable Energy Association founder and chairman James Whittaker, also owner of solar designer and installer Greentech.
“Based on CREA’s analysis, it will only be possible to achieve economic financial returns with the demand rates program using renewable energy,” he said.
Charles Farrington, OfReg executive director for energy and utilities, said, “CUC is discussing the topic of demand rates with CREA, and eventually CUC may propose some alternative-rate structures that involve demand charges, to OfReg for approval.”
The discussions, he said, “are part of the process, but we are not there yet. If OfReg [were] to approve alternative rates for some consumers, it would be subject to consumer-education efforts on the part of CUC and so … consumers would learn about them in advance.”
CUC acknowledged that charges were still under discussion, but sought to minimize concerns: “The rates are still being finalized. However, they are designed such that CUC is revenue neutral, i.e., the rates will not result in any new revenue or reduce any existing revenue,” Mr. Tibbetts said.
Demand billing is widely employed elsewhere, justified on the grounds that a power company must maintain the equipment and infrastructure to supply customers’ peak requirements.
CUC meets peak demand of 103.4 megawatts, and retains a generating capacity of 161 MW.
Mr. Tibbetts said the new “demand” charges will ape “standard rate structures for large commercial customers in many other markets.”
“Demand rate structures allow the customer to be billed on all the costs of their service so that they can make decisions on how they can save costs for themselves with respect to their peak-power demand and their energy usage,” he added.
Reliance on renewable energy and privately operated CORE systems – with storage batteries – is the chief method of managing energy consumption. Mr. Whittaker said demand billing could boost renewables, but only if the private systems achieved “economies of scale,” generating several hundred kilowatts.
“Over time,” he said, however, the scale would diminish, ultimately ending CORE, “but this will take a few years still.”
“In my view,” he said, “we are moving to demand billing to more fairly allocate the need for capacity for certain customers, typically large commercial entities, as well as to facilitate programs that can utilize renewable energy and energy storage outside of the CORE program.”