UTILITY BILLING: BASIC TERMS AND STRUCTURE
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Accredited Texas Energy Manager (ATEM) Training Curriculum © Texas
Energy Managers Association (TEMA) Page 1
UTILITY BILLING: BASIC TERMS AND STRUCTURE
Introduction Beginning in 2001, electricity procurement for some of
our facilities changed in a profound way, deregulation had
officially begun. The premise for electricity deregulation was that
customers were generally over-paying for electricity procurement.
Entities served by municipalities and electric cooperatives were
exempted from this change under the perception that citizen-owned
or member- owned companies, by their very nature, had the financial
interests of the citizen or member in mind. The Investor Owned
Utilities (for-profit electricity providers) however, were forced
to divide and separate their businesses into newly defined and
isolated services. Thus was born two distinct sides of the State of
Texas electric utility industry: Retail Electric Provider (REP),
and the Transmission and Distribution Utility (TDU). The REP is the
deregulated element of this new electricity market in Texas. They
represent the retail side of the market by offering the sale of
electricity as a commodity to the end user. They are legislatively
bound to remain separate and isolated from the TDU Companies that
partner with the REP to ultimately provide the power of purchase
decisions to the client. The TDU Company is the regulated side of
the industry and is the remaining element of the original "Investor
Owned Utility." These companies remain regulated by the Public
Utility Commission (PUC) and must obtain the PUC's approval to make
changes to rate and fee schedules. They are the companies
responsible for generating electrical power, transmitting that
power to the final end-user, installing and maintaining power
lines, performing meter reads, and providing all services required
to get the power that a facility purchases from an REP actually
delivered to the site. Inspection of utility bills in a deregulated
electricity market will typically reveal two distinct sets of
charges. The REP charges, sometimes called "Energy Charges" are
usually the first line items of a bill. The TDU charges, with all
its "Pass-through Charges" are generally listed second. The REP
charges are reflective of the contract price per kilowatt-hour
($/kWh) negotiated for the purchase of electricity. It is generally
a flat rate cost per unit of consumption and the calculated cost
total is typically easily checked. The pass-through charges are the
result of the TDU rate schedule under which the facility operates.
A facility's rate schedule is often determined by the quantity of
power that the facility may require at any given time (demand) and
is usually not negotiable. The fee schedule associated with these
charges is complicated and, in many cases, completely unable to be
proven by the customer from the information contained on the
utility bill alone.
To maximize your energy usage dollar, you must understand both your
utility billing and rate structure.
Utility Bill Training
Accredited Texas Energy Manager (ATEM) Training Curriculum © Texas
Energy Managers Association (TEMA) Page 2
Utility Bill Components
Utility Bills have three basic classifications of charges: •
Customer Charges – Fixed charges that cover the general operating
expenses of the utility
company. They are non-negotiable and may appear on the bill even if
no electricity is consumed during the billing period.
• Energy Charges – Charges associated with the consumption of
electricity. Consumption is power used over time and has units of
kilo-watt-hours (kWh) or kilovolt-ampere-hours (kVAh).
• Demand Charges – Charges associated with the overall quantity of
power used at a given time. The “instantaneous” demand for a
facility is actually the average power required over a 15 to 30
minute interval and is the measure of the total amount of power
being used within a facility by all equipment that is turned on at
a particular point in time. The billed peak demand is the highest
level of demand that the facility used during its billing cycle.
Demand on utility bills is often shown i n 3 or 4 different
ways:
NCP Demand – This is the term given to traditional demand, the peak
demand recorded for a meter during the billing cycle. It will
generally change every month. Billing Demand – The term given to
ratcheted demand. Rate schedules often allow a utility supplier to
charge for a certain percentage of the highest NCP Demand recorded
within the last approved cycle. For instance, if a rate schedule
allows a utility to charge 80% of the highest NCP Demand recorded
in the last 11 months (for example - 1,000 kW) and the current
month's recorded NCP Demand was 750 kW, then some of the charges in
the TDU section of the utility bill will be multiplied by 800 kW
(80% of 1,000 kW) instead of the 750 kW that was recorded as the
NCP Demand for the month. If the facility sets a new NCP demand
that is larger than 80% of the annual peak demand recorded in the
previous 11 months (for our new example, 850 kW), then it becomes
the new Billing Demand for the month . 4CP Demand – Generally the
average of the NCP Demands for the months of June, July, August and
September of the previous calendar year. The 4CP demand factors in
a rate schedule governing the utility bills in 2015 are subject to
the NCP Average Demands of the 2014 June-September billing periods.
This implies that the all of the estimated energy savings generated
from an energy reduction project implemented in October 2014 will
not be realized on the utility bills until October 2015. The energy
savings measure was not in operation during the months of
June-September in 2014 and the savings from that measure would
therefore not be in effect for the 4CP Demand until after the 2015
4CP months are measured.
Utility Bill Training
Accredited Texas Energy Manager (ATEM) Training Curriculum © Texas
Energy Managers Association (TEMA) Page 3
Power Factor Corrected Demand - Electricity within the supply grid
is not able to be stored until it is needed by a facility. It
cycles around the wires, constantly moving, waiting to be drawn out
of the supply grid. As a facility uses power, not all of it is
converted into mechanical energy or heat and some of it is returned
to the system. Utility Companies are required by ERCOT (the Energy
Reliability Council of Texas) to maintain at least 97% power factor
electricity in the grid system; therefore, if end users return
power to the system at a level less than 97% power factr, the
utility has to correct the power factor back to at least 97%.
Utility companies measure the power factor of the electricity at
the utility meter and charge customers for this power factor
correction. The formula is generally [0.95 times the Demand Reading
divided by the measured power factor]. This adjusted number is used
as the Power Factor Corrected Demand for some fees within the rate
schedule.
Units of Electricity As we have begun to learn, power factor is a
measurement of the usable power within an electrical system. In
simplistic terms, if the power factor of a system is 0.85, then 85%
of the power within the available electricity is "usable". Apparent
Power generated by electric motors is calculated by multiplying the
voltage of the system (volts) times the current in the system
(amps). The units become volt-amperes (VA). Real power consumed by
electric motors also includes the power factor (volts times amps
times power factor) and the units become watts. Some utility
companies (EX: Centerpoint Energy) show demand charges on their
bills as kVa (thousand-volt-amperes) and do not include the power
factor in the calculation. Most other companies still indicate
demand charges by kW (thousand-watts), which does include power
factor in the calculation. This should not be confused with power
factor correction charges or Power Factor Corrected Demand (shown
in our Oncor example in units of rpfa, real power factor
adjustment, or a pfa, apparent power factor adjustment) which is
calculated separately from the power measurement itself.
Verification of Utility Bills The process used to check utility
bills should ideally be quick and easy. In reality, however, the
process can be quite cumbersome. A lot of the confusion has arisen
due to utility bills being provided to Owners in increasingly
abbreviated formats. Some of this is due to Owner's requesting
summary billings, and some of it is due to the REP and the TDU
companies having to remain disconnected as they conduct business.
One of the largest sources of frustration can occur as the Owner
tries to identify the source of the demand charges used in the
bill. With up to four different demand quantities, it is difficult
to identify which demand quantity should be used in the different
fees of a rate schedule. Compounding this issue is the lack of
definition by utility companies as to what the actual quantities
really are. Typically, utility bills do not identify the ratcheted
demand or 4CP
Utility Bill Training
Accredited Texas Energy Manager (ATEM) Training Curriculum © Texas
Energy Managers Association (TEMA) Page 4
demand quantities, much less at what point in time these adjusted
demands occurred. It is possible to back-calculate what the numbers
are, but then the auditor must assume the billed amount to be
correct and is not actually verifying the utility bill - they are
just verifying that the utility company computer can perform simple
algebraic calculations. To actually verify a utility bill, the REP
and the TDU need to define each of the factors used in the
calculation of the bill on the bill itself - and it almost never
happens. The Owner has the right to negotiate the delineation of
the factors on the bill, but the utility companies must be willing
(or able) to comply. Due to the separation of the REP and the TDU
accounting departments, the sharing of this type of information is
apparently not as easy as one might perceive it to be. We know,
however, that they did get the information from somewhere and
therefore it should be able to be made available to the end user.
As a result, the billing verification process must be developed
within your organization by an assigned staff member (or
department) willing to learn both the REP and TDU sides of the
billing:
REP - Essential Information: 1. Keeping track of electric rate
trends over a multiple-week period is essential if you are to
know the current $/kWh prices and, more importantly, when the
quoted daily rate is abnormally higher than recent daily
values.
2. Knowing current usage for the overall entity, and the plans for
adding or decreasing usage (such as adding additional square feet
of building area) is essential for establishing a contracted
Bandwidth (+ or – usage above or below an accepted nomination or
predicted consumption quantity.)
TDU – Essential Information:
1. Rate Schedule “recurring charges” 2. Rate Schedule
“non-recurring charges” 3. Rate Schedule stated charges per kW,
kVa, kWh. 4. PUC approved “Rider” charges (typically change every 6
months)
Overall Billing Calculator The end user must create a calculation
format (spreadsheet) that includes all the variables within the
Rate Schedule, and also allowing a monthly check of Riders
(provided on the PUC website) to see which variable(s) has changed
and which remain consistent. With this spreadsheet, monthly
consumption and demand data can be inserted and the billed amount
can be checked.
Utility Bill Training
Accredited Texas Energy Manager (ATEM) Training Curriculum © Texas
Energy Managers Association (TEMA) Page 5
BASIC CHARGES YOU MAY FIND ON YOUR MONTHLY ELECTRIC BILL BASE
CHARGE: A flat fee applied each month regardless of the amount of
kWh used. CURRENT CHARGE: Current charges for electric service as
disclosed in the customer’s terms of service document, including
applicable taxes and fees. DEMAND CHARGE: A charge based on the
rate at which electrical energy is delivered to or by a system at a
given instant, or averaged, or a designated period, during the
billing cycle. ENERGY CHARGE: A charge based on the electrical
energy (kWh) consumed. METER CHARGE: A charge assessed to recover a
TDU’s charges for metering a customer’s consumption, to the extent
that the TDU is a separate charge exclusively for that purpose that
is approved by the Public Utility Commission. RECURRING CHARGE:
Identifies and itemizes any recurring charges other than for
electric service. NON-RECURRING CHARGE: Identifies and itemizes any
non-recurring charges such as late fees, or other fees disclosed in
the Retail Electric Provider’s terms of service contract provided
to the customer. NEW SERVICE OR PRODUCT: Notice of any new products
or services being provided to the customer since the previous bill.
RATE CHANGE: Any changes in the customer’s rates or charges due to
the variable rate feature of the terms of service contract. LATE
PAYMENT PENALTY: A one-time penalty of not more than 5% may be
charged on a delinquent bill. Outstanding delinquent balances
cannot be re-penalized. Penalty does not apply to the residential
or small commercial customers of the Provider of Last Resort
(POLR). CITY SALES TAX: Sales tax collected by authorized taxing
authorities, such as the state, cities, and special purpose
districts. ADVANCED METERING SYSTEMS SURCHARGE: A PUC authorized
charge for electric delivery companies to recover the costs for
their Advanced Metering Systems. This charge will be shared among
all electricity users who receive an Advanced Meter. Your monthly
charge will be added to your electricity bill for the next several
years. COMPETITION TRANSITION CHARGE: A charge assessed to recover
a TDU’s charges for non- securitized costs associated with the
transition to competition.
Utility Bill Training
Accredited Texas Energy Manager (ATEM) Training Curriculum © Texas
Energy Managers Association (TEMA) Page 6
ENERGY EFFICIENCY COST RECOVERY FACTOR: A charge assessed to
recover a TDU’s costs for energy efficiency programs, to the extent
that the TDU charge is a separate charge exclusively for that
purpose that is approved by the Public Utility Commission. PUC
ASSESSMENT: A fee assessed to recover the statutory fee for
administrating the Public Utility Regulatory Act. REP CHARGES:
Retail Electric Providers may bundle all charges associated with
your electric service into the price per kWh or they may separate
the charges. TDU DELIVERY CHARGES: Charge to recover the cost of
moving electricity from the generation plant to your facility.
TRANSMISSION DISTRIBUTION SURCHARGES: One or more TDU surcharge(s)
on a customer’s bill in any combination. Surcharges include charges
billed as Tariff Riders by the TDU. TRANSITION CHARGES: Utilities
are allowed to securitize or refinance their regulatory assets
and/or stranded costs (assets that become uneconomical as a result
of deregulation) as long as it benefits ratepayers. Securitizing
debt provides funding at a lower cost than traditional utility
funding. Utilities are also allowed to recover the transactions
costs of securitization through this fee. SYSTEM BENEFIT FUND: A
non-by-passable charge set by the PUC, not to exceed $0.65 per
megawatt hour. Pays for energy efficiency and customer education
programs. MISCELLANEOUS GROSS RECEIPTS TAX REIMBURSEMENT: A fee
assessed to recover the miscellaneous gross receipts tax imposed on
Retail Electric Providers operating in an incorporated city or town
having a population of more than 1000. NUCLEAR DECOMMISSION FUND
FEE: A fee that covers the cost of safely removing a nuclear
generation facility from service, reducing residual radioactivity
to a level that permits release of the property for unrestricted
use and termination of license. Only the local wires company or
transmission and distribution utility can assess this fee to any
company that uses its wires to deliver electricity to consumers.
AMOUNT DUE: Balances from the preceding bill, payments made since
the preceding bill, total amount due and a checkbox for the
customer to voluntarily donate money to the bill payment assistance
program.