Caribbean Utilities Company’s new demand billing scheme could be offset by private solar installations, forcing the utility to move consumers instantly to its new rate structure to prevent damaging the company though “demand destruction.”
Announced on Monday, CUC’s new demand billing scheme seeks to shift power consumption to off-peak hours in an effort to spread loading and minimize company investment in new – and expensive – infrastructure, including generators, transformers, substations, and transmission and distribution grids, to meet to peak demand.
For example, in June 2016 CUC commissioned two new diesel generators, costing $85 million, designed to serve for 25 years.
According to Monday’s statement from the utility’s Customer Service Team, the three-year plan – to be phased in starting in January – applies only to CUC’s 129 largest commercial customers, those consuming more than 38,800 kilowatt hours per month for three consecutive months.
Among such clients are The Ritz-Carlton, Grand Cayman and Foster’s Food Fair, each of which consumes more than the prescribed monthly rate.
Demand billing also means, however, that monthly invoices will be pegged to the highest 15-minute average consumption of electricity recorded within a given month. The calculations are made possible by CUC’s 28,000 new “smart meters,” installed in all customer premises during August last year, making demand billing possible by tracking hours of consumption.
Seeking to offset peak consumption, however, and shift demand, customers may invest in rooftop solar-generation systems – called “distributed generation” – and employ battery storage to smooth out irregularities caused by cloud cover and darkness.
Louis Boucher, deputy executive director for energy and utilities at the Utility Regulation and Competition Office, said demand billing was intended to be “revenue neutral,” leaving CUC coffers unaffected, but warned the plan could be threatened if “large commercial users decide to implement distributed energy resources (DERs), and if they are successful in continuously shifting their peak demand to off-peak times, this could be damaging to CUC and could create what is referred to in the industry as “demand destruction.”
If large commercial clients build sufficiently large private solar-power systems, they could force CUC to shift clients immediately to 100 percent demand billing, skipping the three-year program phasing in the new system.
However,” Mr. Boucher said, “with weeks like last week where there was significant cloud cover throughout the week, it may prove to be difficult to operate continuously with intermittent distributed energy resources, such as wind or solar, even with backup battery storage.
“Note that large commercial customers wishing to employ DERs (outside of CUC’s Consumer Owned Renewable Energy Program) will be shifted to 100 percent demand rates, there will be no phased-in approach for these customers.”
The CUC plan calls for “an incremental” shift in billing amounts allocated to actual energy consumption and peak-hour demand charges.
The CUC statement explained “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.”
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 to 66 percent, followed by 100 percent in “year three.”
While “there are no plans at this time” to introduce demand rates for residential customers,” Mr. Boucher said, “for private customer wishing to install DERs (outside of CORE), they will be transferred to 100 percent demand rates once they do so, similarly to large commercial customers.”
As of June 30, CUC had 24,531 private customers and 4,272 commercial clients.
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 commercial consumption of 58,101 kWh in the same period.
At present, CUC has a capacity of 161 megawatts, meeting a peak demand of 104.8 megawatts, registered in early June.