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Question of the Day
Question
The Power Company in my area is advertising a "time of use" program pretty heavily right now. My questions are: 1) Can I really save money? 2) Isn't it a pain in the neck? 3) What does it do for the Power Company? Why would they want me to save money?
Answer
Most power companies offer a time-of-use program of some sort. In my area the Power Company is called Carolina Power and Light (CP&L), and they offer a time-of-use program that makes a good example (even though every program is different).
Most people pay a flat rate for their power. For example, CP&L's flat rate is about 7.4 cents per kilowatt-hour right now. If you use 1,000 kilowatt-hours in a month, you pay $74.00 for the month (plus some taxes).
The idea behind a time-of-use program is to put a special power meter on your house so that the Power Company can bill you differently depending on the time of day. For CP&L there are only two different time periods: "on-peak": and "off-peak". In the summer (April through September) the on-peak hours are 10 AM to 9 PM on weekdays. Nights, weekends and vacations are off-peak. During the winter the on-peak hours are slightly different (6 AM to 1 PM and 4 PM to 9 PM on weekdays).
There are two different programs in the CP&L time-of-use plan. We use the simpler of the two. Under this program you pay:
Assuming we use 1,000 kilowatt-hours in one month, if 333 are on-peak and 667 are off-peak, then the total bill is $64.83, or a $9.17 savings (12%).
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You can see that this approach provides a good incentive to move as much power consumption as possible to off-peak hours. So things like laundry, dish washing, showers, etc. move to off-peak hours (nights and weekends). None of these things seem to be a big inconvenience, and we are generally able to move things so about two-thirds of our power consumption is off-peak.
So what does the Power Company get out of this? Why would they want to charge you less for electricity? It turns out that the Power Company has a problem -- it cannot store power. During hot summer days when everyone has their air conditioners on, there is a huge load on the Power Company. The Power Company has to build enough power plants to meet that peak load. At other times of the day and at other times of the year, much of the power-generating capacity is unneeded. This unneeded capacity costs lots of money to build but generates very little income, so the Power Company wants to even things out. It wants to try to reduce the peaks so it does not have to build extra power plants. It is much cheaper to give people a discount than to build a new plant, so the time-of-use program gets created. They might be pushing it now to try to get people to sign up before the summer crunch.
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