Most companies feel they are paying too much for their electricity and at the perilous mercy of their respective utility provider because they don’t understand their utility account… well, you don't have to be a hostage and why should you? Usually, the person paying the account is a bookkeeper or accountant and you need a technical skill set let alone a University Degree to understand the bill. Never mind the situation when they re-bill you saying, “We have been under billing you for years!” All the credits and re-entries will confuse even Einstein. Do you need help to make sense of it all?
It’s nobody’s fault if they cannot understand what they are paying for because they can’t interpret the technicalities on a utility account. It can be so frustrating not knowing what a kWh or kVA is and what are all the other line item charges are for? One can’t help but feel frustrated or taken advantage of. So, like a good citizen, we just pay, even if we know there is something wrong but can’t prove it. This is precisely why Clients partner with Archon…
Archon has many energy management tools to help you understand the way that your business pays for energy and to be as efficient as possible. Our management tools are designed to help you save on your energy spend, identify electricity tariffs that are optimal for your business’s energy use and identify abnormal energy consumption and bills.
Electricity is billed according to several components:
Energy use (kWh) - This is the total amount of electricity that was used for the month. This will represent the sole component of residential bills and one of the major components of business electricity bills. Electricity use could be compared to the volume of traffic moving along a highway. Here we generally look for fluctuations or variances of more than 10%. This means something is wrong or malfunctioning.
Demand (kVA) - This is the total amount of power that your energy utility needs to generate for your business. As your utility does not know when you will use the power, they constantly need to have the capacity available to meet your demand for electricity. There is a cost to building power stations to have the capacity available, and thus businesses need to pay for the maximum demand that they use every month. Demand is like the number of lanes on the highway – they may not always be fully used but need to be available for peak times when they are needed. Here we see how you keep you from exceeding demand and the penalties associated and keep you there.
Reactive energy (kVArh) - Electricity has a waveform, and certain equipment changes the pattern of the wave. This means that energy utilities need to generate more electricity, and this reactive energy is often charged for. Reactive energy could be compared to the emergency lanes: traffic cannot flow through these lanes normally, but they are an essential part of the highway system. When we see a reactive charge we get excited because this is energy supplied that you did not ask for, did not use and gets returned to the sender but you still get charged for.
Service charges (ZAR) - These are billed to recover administrative and office costs. There may also be environmental and other levies. In the analogy, these charges would be like your vehicle license. These are generally constant and also a small part of your bill, but still, they should not be exorbitant.
When you work through your electricity bills you should see these line item charges, and once you understand the billing you can start to manage your consumption and consequently your billing.
Beyond this, you should look at the different tariff options of your municipality or electricity utility. There are tariffs that focus on recovering most of the revenue from the demand component of consumption (kW), or from the kWh consumption and/or from the time of day that energy is used. As such, you should consider all the options available to purchase electricity for your business. Archon has helped many businesses save large amounts of money just by switching electricity tariffs.
Further, it is worthwhile installing a Check Meter on the main incoming line to your business to confirm that you are being billed correctly. Electricity Meters, like other electronic equipment, can fail or be partly operational; and in this case, a Check Meter can be used by your business to identify any errors. Furthermore, accounts departments and meter readers can make errors, and as such, it is worth having a way to check your monthly bill.
A short explanation of time-of-use tariffs may be required. The energy wheel below contains times for peak (red), standard (yellow) and off-peak (green) times. These times are structured according to when demand is highest on the national grid, and the cost per kWh charge is structured to try to manage and reduce consumption during peak times.
There may be some summer and winter variations in tariffs and times. The concept of the time-of-use tariff as applied for weekdays (outer circle) is as follows:
The off-peak (green) rate for kWh consumption will be charged from 00:00 to 06:00, and from 22:00 to 00:00.
The higher, standard (yellow) rate for kWh consumption will be charged from 09:00 to 17:00, and from 19:00 to 22:00.
The peak and highest (red) rate will be charged from 06:00 to 09:00 and 17:00 to 19:00.
You can determine the rate for kWh consumption (R/kWh) moving clockwise around the circle and using the correct weekday, Saturday or Sunday circle.
Demand charges
Understanding how demand is charged is also valuable when managing your electricity bill. The highest electricity demand in any 30-minute interval in the month is recorded as your maximum demand, and this is the amount for which you are billed.
Depending on your tariff structure: you may just pay that highest demand for the month; you may have to notify your utility in advance of your maximum demand; and/or your maximum demand may run in a rolling 12-month period, thereby extending charges for a momentary lapse in energy management if your demand spikes.
For the case where your business is required to notify the utility of your demand in
advance, and if your notified demand is exceeded, there may be additional penalties
to pay. If demand components form a financially substantial portion of your bill,
you should take some time to familiarize yourself with how demand is charged on
your tariff. You should be able to get a tariff booklet and explanation from your energy utility to assist with your research.
An Energy Bill from Eskom has been included below with an explanation of the components of the particular tariff. Your bill might look different depending on the Municipality or Utility that supplies power to you.
The Energy use charges on this bill are
Energy Charge and
Ancillary Service Charge.
The Ancillary service charge is a reliability charge that includes services, such as frequency control, voltage control, generation standby plant and generation of emergency reserves and black-start capability.
The Demand changes on this bill are
Network Capacity Charge and
Network Demand Charge.
The Network Capacity Charge is the rand per kilo volt-ampere (R/kVA) fixed network charge raised to recover network costs. Depending on the tariff, your business may be charged on the annual utilized capacity or maximum export capacity.
Maximum demand may be measured, or your business may have to nominate a notified maximum demand if your utility does not measure demand. If your notified maximum demand is exceeded, your business may have to pay penalties. At Archon, we can identify when and why you exceed maximum demand and able to advise on how to minimize it happening in the future.
There are no reactive energy charges on this bill. Reactive Energy is essentially energy that has been supplied to you (and you are charged for it) but you did not utilize it, and it goes back into the grid without you using it. When we see KVArh (Reactive Energy) on your bill we are confident that further investigation will establish that a Power Factor Correction Unit will be beneficial.
The service charges on this bill are service and administration charges.
By knowing your bill, you can identify if something seems incorrect and then take action by contacting us to do a further investigation and see how we can have it rectified. There is no need to just pay for things that are incorrect, no need to be baffled by re-bills and not sure what all the extra charges are for.
Contact us at Archon to have a good look, you will be surprised as to how many problems there are, we can pick them up and resolve them for you, giving you more time to concentrate on the more important things like running your business.