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.”

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2 COMMENTS

  1. The one thing I see this article doing is playing with the minds of people. There are too many draw downs and forward march in this report. Please tell the people in few words and Cayman Spanglish what are the intentions.

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  2. It is true that most utilities in the US utilize “demand” charges for billing. Mr. Whittaker said, “Reliance on renewable energy and privately operated CORE systems – with storage batteries – is the chief method of managing energy consumption”. That is a somewhat misleading statement by someone who makes their living from renewable energy products.

    A few methods used in the US by companies to minimize the effect of demand charges customers should consider are the following. If your major load consumption is air conditioning you might consider a thermal storage system such as ice or chilled water (depending or your particular needs). With either system, you generate the ice or chilled water during off-peak hours and use a simple pump motor to move the cooling fluid through your air handlers during the “peak” hours.

    If you are in a manufacturing or process industry an alternative is shifting hours of operation to off-peak hours or install variable speed or frequency drive systems to improve the efficiency of motor operations. These are essential for large motors of 25 HP or greater but can be beneficial on smaller motors of 5 and 10 HP as well if they are not continuous run motors. That is you don’t need peak motor power continuously but rather in a variable manner. Load shifting is the most cost-effective thing you can do if you are on Peak Demand Billing and it costs virtually nothing.

    If you have large motors determine your “Power Factor”. This is generally done by a professional electrician or by CUC. A poor power factor can cause overheating of electrical panels and cause inefficiencies of the motors that are running. While CUC does not charge for “Power Factor” it can be an important factor in the sizing of their electrical system components.

    Solar power can be most cost effective when installed by CUC. Yes, larger commercial systems (solar farms) are not only more efficient but less costly to install. Companies such as NextEra Energy (FPL’s parent company) and other major renewable energy companies can install large scale solar at less than half the cost of distributed small roof-top solar installations and they provide cost benefits to all customers. With large utility scale solar operations all customers of the utility benefit form the savings, not just the elite few that can afford (with subsidies from the government or CUC which all customers pay for thru subsidies) to install roof-top solar. Think about Cayman and the fact that it requires about 700 – 800 acres of land to install a 40mW highly efficient solar farm. How many roof tops does Cayman have?

    Battery backup systems when combined with large utility scale solar projects can provide the ride-thru during the night, late evening or early morning hours when the solar photo-voltaic system is not producing (no sunlight). When these are combined with a solar roof-top unit the cost of the entire system is exceedingly higher and generally not cost effective unless the government and CUC subsidizes a large portion of the cost.

    To further reduce your total commercial and residential energy costs consider the following: Install energy efficient LED lighting. Fixture replacement works best, if you can afford it. Use LED bulb replacement of you cannot afford the whole fixture but some older fixtures and dimmers are not compatible with LEDs. Ceiling fans can be beneficial if you are physically in the room. Ceiling fans cause moisture to evaporate from your skin more rapidly and thus helps to cool you more effectively. Window exhaust fans can pull the air thru a home at a faster rate thus providing added comfort. Turn these off when you are not in the room or returning to the room quickly. Use exterior shading such as bushes, trees, landscaping, awnings and other means of protecting your windows and walls that face east and west. Insulate your attic space if you have one but make sure to keep proper air-flow thru your attic to prevent causing heat, mold and mildew to accumulate in the attic area and damaging the roof. Turn off any unnecessary electrical equipment when it is not in use (count the number of small LEDs on all of your appliances, phone chargers, computers, printers, etc., it all adds up to energy consumption). Replace motors as needed with high-efficiency motors – rewinding is not always the best answer. Replace air-conditioning systems with high and super-high efficiency units (greater than 16 EER – some are as high as 25 EER today) as your old one fails.

    All of the above, which are just a few ways to manage energy costs, can impact CUC and their operations. It could be potentially problematic for CUC financial forecasting, and future electricity costs, if a comprehensive approach to the “RATE” design scheme is not undertaken. Instituting peak demand charges without understanding the impact of customer reaction toward more efficient operations and reduced energy use can possibly create higher costs for CUC. Adding distributed generation haphazardly around the island will impact the distribution, transmission and generating operations of CUC and may potentially drive up costs for all customers. It may also cause reliability issues for neighbors of those having the roof-top solar and battery backup systems.

    Another issue to consider is “Cost to serve”. Are costs to serve certain customers and certain customer loads being levied or levied appropriately? It generally costs less to serve a single large customer that has a steady load throughout the day than it does to serve a customer that spikes energy use at certain times of the day or a home or business located in a remote area requiring additional power lines, etc., to serve them.

    Lastly, keep in mind the embedded costs of infrastructure that CUC has built into the system over the years. Any massive effort to shift from diesel power to solar impacts those embedded costs of infrastructure. When it becomes cost effective to remove a diesel generator from service Cayman wins. To replace a 40mW diesel generator you must have an equivalent, reliable amount of sustainable generation from solar, wind, water, battery or some other source that together produces that 40mW of power continuously for many, many years. That is when costs for electricity will come down.

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