Energy Rates

Understanding and Managing Business Energy Rates

By Jamie Chesler

A business's energy consumption and its commercial utility bills can be among the most difficult operating costs to understand, manage and predict. Both seasonal and unseasonal weather patterns can have confounding effects on business electricity rates, and growing businesses are likely to have continually evolving energy needs.

One crucial variable in understanding business energy consumption is the timing of when that energy is used. The cost of producing electricity varies based on several conditions, with weather playing a predominant role. And the way businesses manage their electrical use over the course of the day also has an important effect on commercial utility bills.

Gaining a deeper knowledge of how time of use impacts utility bills, and using that information to improve commercial energy efficiency, can go a long way toward energy reduction for businesses and reduced monthly utility bills.

Understanding business energy rates
A common misperception about how utility companies make money is that their profits are tied to how much energy they sell. In the case of Pacific Gas and Electric Company (PG&E), the process of decoupling – separating volume from profit – actually encourages the utility to incentivize the adoption of residential and commercial energy efficiency practices and products.1

Just as important, the decoupling process, along with California's emphasis on energy efficiency, incentivizes PG&E to work with its commercial customers to improve the efficiency of business energy consumption. PG&E offers its customers time-of-use rate plan options so that pricing can more accurately mirror the cost of production.

There are several time-of-use rate plan options available to business owners and managers who want to have more freedom to determine their business's energy consumption and utility costs. PG&E offers businesses several ways to manage and save money on commercial utility bills through its online My Energy tool, or by working directly with a Customer Relationship Manager.2

Time-of-use rate plans
Time-of-use rates are based on the principle that the cost of producing electricity rises and falls as demand increases and decreases. Instead of charging one flat price, the business energy rates reflect the cost of structure, weighing the days and times when more energy is used.

When energy demand is higher, e.g., on weekdays, prices rise. When demand is lower, e.g., on weekends, prices drop. Businesses can realize significant savings on their commercial utility bills by actively managing business energy consumption during peak periods, when rates are higher, and shifting that use to cheaper off-peak times and days. Additionally, businesses can consider energy efficiency measures to reduce their overall energy consumption. PG&E offers a number of rebates to assist Northern California businesses, making energy efficiency improvements more affordable.

Peak Day Pricing rate plans
Making a commitment to participate in a Peak Day Pricing rate plan is a strategic choice for a business. Peak Day Pricing is typically a fit for businesses that believe there is flexibility to reduce or shift energy usage during certain time periods. Northern California businesses can weigh the risk in participating with the benefits of the rewards.

Peak Day Pricing works in conjunction with time-of-use rates, offering business customers a discount* on normal summer electricity rates in return for reducing their electricity usage during the 9 to 15 Peak Day Pricing Event Days per year—typically the hottest days of the summer.3

Peak Day Pricing Event Days are announced one day ahead of time, giving business owners and managers the opportunity to implement energy reduction plans during those events. During Peak Day Pricing Event Days, a surcharge is added to a business's utility bill for all energy used from 2 to 6 p.m. on that day.

Business owners and managers who are interested in trying out Peak Day Pricing are further incentivized to do so with PG&E's risk-free Bill Protection program during their first year. Businesses can opt out of Peak Day Pricing at any time.

Understanding the Demand Charge
Some business energy rate plans include a Demand Charge. Demand is measured in kilowatts, and it applies to the highest electricity usage rates during a single 15-minute, or sometimes 5-minute, period within a monthly billing cycle.

Most businesses experience peaks in demand when equipment is started up. So the type of equipment a business uses (whether or not it is energy efficient) and when that equipment is turned on has a direct correlation with the Demand Charge. The most effective method of reducing or eliminating the demand charge is to purchase energy efficient equipment and spread out the start-up times for equipment over the course of the day.

How businesses can effectively manage and control their energy bills
PG&E makes it easy for business owners and managers to save money while reducing energy consumption through a combination of incentives, rate plans and valuable information. To learn about other ways businesses can improve energy costs and efficiency, download "The Complete Guide to Working with a Lighting or HVAC Contractor" from PG&E.

* Effective summer rates are lower after Peak Day Pricing credits have been applied, but effective rates are higher during Peak Day Pricing Event Hours

Referenced in article:
  1. Pacific Gas and Electric Company
  2. Pacific Gas and Electric Company
  3. Pacific Gas and Electric Company

Learn about your business’s energy rates and how to effectively manage energy consumption.
  • SMB Blog Author
    Jamie Chesler
    Senior Manager for Business-to-Business Marketing at PG&E, leads marketing initiatives that provide educational information and tools to help business customers positively impact their energy consumption and overall bottom line. With a specialty in small to medium-sized business marketing, Jamie brings awareness and understanding to businesses on the benefits of energy management. In this dynamic role, he also strategizes marketing programs and communications related to energy efficiency, rates and energy-related resources for business of all sizes.

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