12 April 2013
Jeff Weir, Senior Tariff Analyst, HeavyDutyDecisions.co.nz
LINES INCREASES HIT MANY BUSINESSES IN POCKET NEEDLESSLY.
Increases in lines charges come into effect on this month will add thousands to power bills for some businesses. But Jeff Weir of tariff analysis company HeavyDutyDecisions.co.nz says that many businesses could save thousands by ensuring they are on the right lines plan in the first place.
“Electricity distribution companies change their prices on the 1st of April each year, and retailers pass through any increases to end consumers. But what businesses don’t realise is that there are usually a number of different delivery plans – called load groups within the industry – that apply to non-residential connections. Sometimes tariffs differ radically from one load group to the next in terms of end cost. Yet the suitability of the load group you’re currently assigned to probably hasn’t been checked in years, if ever.”
Mr Weir estimates that many thousands of businesses might be able to switch to a different load group for economic benefit, with savings of up to tens of thousands of dollars per year on offer.
“The particular load group your business is on is usually tied to either the size of your master fuse for your site; the type of metering you have installed; or the amount of electricity you use in a year. Sometimes it depends on a combination of these. While you can’t easily change how much electricity you’re using, changes to your fused capacity or your metering configuration could be the key to unlocking significant savings.”
Mr Weir cites an example of a motel on Wellington Electricity’s network that had a fused capacity more suitable to a large industrial site than a motel.
“They installed a lower-capacity fuse, which allowed them to change from an Industrial load group (GV99) to a lower-capacity commercial one (GV30). They saved over $8,000 per year. And that was 4 years ago…meaning they’ve now avoided over $32,000 in lines charges, simply by changing a fuse.”
Mr Weir advises that before defusing, you’ve got to make sure the smaller fuse will still handle your peak load.
“Smaller sites will need to get an electrician to measure what their peak is when everything is turned on at the same time, as this will tell them the minimum capacity fuse they need to get by. Larger sites usually have a Time-Of-Use meter installed that records peak demand, and this monthly peak is usually printed on their energy invoice. Many sites in both camps will have far larger capacity fuses installed than they will ever come close to needing.”
“Sometimes installing a larger fuse will also result in a load group that’s cheaper. For instance, still on the Wellington Electricity network, the GV14/GX14 load groups – for medium-sized commercial premises – are set so high that you could save thousands regardless of whether you install a larger fuse or a smaller one. By way of example, if you use around 150,000 kilowatt Hours per year – 19 times the average domestic household’s annual consumption – then you should save over $3,000 per year regardless of whether you shift to the next plan up or down.
Wellington Electricity documents show there are 403 connections on the commercial GV14/GX14 load groups, and 525 sites on the Industrial GV99/GX99 load groups.
“Most sites on the commercial GV14/GX14 group would probably benefit if they can change off it, and sites on the industrial GV99/GX99 group with peak demand less than 300 kVA could well save in excess of $20,000 per year by changing to the lower-capacity GV30 plan. Check your energy invoice: this should show what load group you’re currently on, and if you have a Time-of-Use meter it will also show your peak demand figure.”
Mr Weir can’t think of any rationale for such a pricing structure.
“Wellington’s network offers no incentive for you to move energy use away from peak times, and the pricing structure of some load groups compared to others seems fairly arbitrary. By way of comparison, on Vector’s Auckland and North Auckland networks, businesses get a big cost reduction if they can shift electricity use to before 8am or after 10pm”
“Lines companies are natural monopolies and while they’re regulated by the Commerce Commission regarding how much profit they make, they can pretty much do what they want when it comes to divvying up their charges among their various load groups. But while you can’t exactly vote with your feet, you may well be able to vote with your fuse”.
Mr Weir says that while these examples are on the Wellington Electricity network, pricing structures on other networks also offer potential savings.
“For instance, switching to a lower load group might save some smaller industrial sites on the Powerco network in the North Island as much as $30,000 per year or more. And on the Northpower network, 140 sites can freely choose whether to be on a demand-based load group or a consumption-based load group – one of which might easily cost tens of thousands less than the other, depending on your specific energy use.”
Mr Weir estimates that hundreds of businesses also likely have their fused capacity incorrectly recorded by retailers and distribution companies.
“This means they will be incorrectly assigned to one load group, when in actual fact they belong in another. So they could be due a refund going back years.”
Mr Weir advises businesses to review the appropriateness of their lines plan at least every two years.
“You don’t want to pay a cent more than necessary, let alone tens of thousands of dollars.”
Jeff Weir, Senior Tariff Analyst, www.HeavyDutyDecisions.co.nz
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