The incumbent electric (EDU) or natural gas utility (LDC) in the provisioning of service to end-use customers incur three levels of expense: (1) generation or supply; (2) transmission; and (3) distribution. The generation of electricity or the supply source of natural gas represents the highest cost component and for a typical customer equates to 70-80 percent of the annual bill. The transmission component is the smallest cost component and normally represents less than 5 percent of the annual bill. The distribution cost, which includes the cost of service restoration and billing, is approximately 25 percent of the total annual bill. Savings are derived by finding the lowest cost supply source of either generation of electricity or purchased natural gas.
The de-regulation component is related to the generation or supply source or the largest component of an EDU’s or LDC’s monthly bill. The incumbent utility normally maintains its supplier of last resort responsibilities even if an end-user secures an alternative supplier and later decides to return to the incumbent. The regulatory agency retains its existing over-sight responsibilities over such matters as customer complaints, service standards and has additional responsibilities relative to the certification of alternative suppliers. These responsibilities help minimize risk to the end-use customer.
Benefits of Alternative Energy
Many firms or governmental entities either ignore or place a lower priority on finding ways to reduce energy expenditures since these essential costs are a relatively smaller percentage of total operating expenses. A thorough and unbiased review of energy costs, whether it is alternative supplies, tariff structure or opportunities for special contracts with the local utility are essential in today’s changing regulatory and economic climate.
Many states have implemented competitive rules for the deregulation of natural gas or electricity. The deregulation model provides the opportunity to lower energy costs.
Utility’s rates are changed after the conclusion of a rate case and subsequently approved by the regulatory agency. Once a rate is used for billing purposes, rate reviews are usually not a normal course of action for the utility. Or load pattern changes resulting in a more opportunistic rate being available.
Today’s economy may mandate a change in operations; e.g., reduce shift operations from 8×5 to 10×4. There is an economic value of reducing energy costs in such a scenario that should be reviewed in order to fully evaluate costs/benefits.
The above opportunities are available when the economy continues to struggle and business and government are under pressure to reduce expenses. Our partnership normally presents ideas or alternatives that do not increase out-of-pocket expenses and directly improve the bottom-line.
“Eagle Energy assisted in our evaluation of electricity supply alternatives that significantly reduced the risk of future unfavorable price variances.”
H. Roderick Robinson, Director of Purchasing, Cincinnati Bell Telephone.
