Capping more than a year of talks with electricity regulators, the Caribbean Utilities Company on Monday announced January 2018 implementation of “demand billing,” charging commercial customers depending on consumption patterns.
In essence, the scheme will reward consumers who shift consumption from traditional peak hours to alternative periods: early morning, late night and weekends.
It also means, however, that monthly bills will be pegged to the highest daily power consumption in any given month.
According to industry experts, demand billing is expected to be “revenue neutral,” leaving CUC coffers unaffected, but simplifying monthly charging and stabilizing CUC assets.
In a Monday statement, CUC’s customer service team said it would implement the plan at the start of 2018, but initially limit it to the company’s 129 “large commercial customers.”
Neither the company nor its Office of Utility Regulation and Competition overseers would say if the scheme would ultimately extend to CUC’s 24,531 private customers, although in August last year, the company completed installation of 28,000 “smart meters” in all customer premises, making demand billing possible by tracking hours of consumption.
“The goal of demand rates is to fairly allocate costs into an energy charge, and fixed costs into a demand charge,” according to CUC.
“The peak demand imposed on the system by consumers drives the amount and size of fixed assets in place, and therefore the level of demand charges.
“Demand rates will … encourage peak-demand management whereby customers focus on using less energy during peak hours by conserving or by moving energy use to off-peak times such as nighttime and weekends.”
CUC’s “large commercial customers” include, for example The Ritz-Carlton, Grand Cayman hotel and Foster’s Food Fair, consuming more than 38,800 kilowatt hours each month.
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. A simple example might be doing a load of laundry at 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. In June 2016, for example, CUC commissioned two new diesel generators, costing $85 million, designed to serve for 25 years.
At present, CUC has a capacity of 161 megawatts, meeting a peak demand of 104.8 megawatts, registered in early June.
The company registered 28,803 customers as of June 30. Of these, 4,272 were commercial. Consumption patterns indicate a more complex story, however, as the larger residential group – almost eight times the size of the commercial sector – used 149 million kilowatts in the first six months of 2017, while the smaller group used nearly 145 million.
Average consumption per residential customer was 969 kWh during the first half of 2017, offset, however by a whopping commercial consumption of 58,101 kWh in the same period.
“Peak demand management may not necessarily decrease total energy consumption, but, by reducing peak demand, it can be expected to reduce the need for ongoing investments in power plants and transmission and distribution assets,” the statement said.
“The reduction benefits all consumers and will impact electrical rates in the future.” In April, CUC Vice President for Customer Services and Technology Sacha Tibbetts told the Cayman Compass demand billing was widely employed elsewhere, and that the new rate structures would 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 said.
Demand billing is already in place in such jurisdictions as 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.
The new scheme will be phased in during three years, and “will be done in an incremental manner.”
In “year one,” the statement said, “the energy charge on bills that currently include 100 percent of demand charges will have 33 percent of the demand charges removed and allocated to the separate demand charge.”
In “year two,” the proportion will rise 66 percent, followed by 100 percent in ”year three.”
Additional charges for the costs of diesel fuel and import duties, licensing and regulatory fees will remain listed separately.
The statement said the new structure initially appeared on commercial customers’ July bills “for informational purposes only, and allows you to begin to take note of the level of peak demand at your various properties.”
CUC will offer “informational” sessions on Oct. 16 and in November to “provide increased visibility of your businesses’ consumption patterns,” giving “you more control over your level of expenditure.
“We feel this rate structure will be beneficial to your organization,” CUC said.