Electric Plan Shocks Businesses

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Long Beach print shop co-owner Hilda Sanchez got a jolt last month when she opened a letter from Southern California Edison explaining that a change is coming in the way electricity bills are tallied for businesses.

Sanchez read that she could save money by shifting as much of her business’s power use to off-peak times – early mornings, evenings and weekends – especially during summer months.

But between the lines, she read something different: Her electricity bills will probably go up.

“I can’t really change when I have to run my printing equipment. The orders come in midmorning and I’ve got to fill them before the day is out,” said Sanchez, whose company is Minuteman Press. “So I’m concerned that I’m going to be stuck with higher power bills.”

Sanchez’s business is one of more than 400,000 in Los Angeles and surrounding counties that will be moved to a “time of use” rate structure starting Jan. 1 as part of a statewide mandate. The idea is to use financial inducements – and punishments – to prompt businesses to shift their power use out of the period of highest demand: hot summer afternoons. If enough businesses do so, then the state’s utilities won’t have to build as many costly power plants.

Currently, only the 12,000 largest Edison customers – including major manufacturers, refineries and regional hospitals – are on this program. For now, residential customers will not be forced into time-of-use programs, though they can voluntarily sign up.

Edison is following PG&E in San Francisco. Last year, that company shifted business customers in Northern and Central California into time-of-use plans.

On Jan. 1, 80 percent of Edison’s small- and midsize-business customers – about 400,000 accounts, including Sanchez’s, will be billed on the plan. The remaining 20 percent will be phased in by early 2015.

New peak charges

Executives at Southern California Edison, a unit of Edison International of Rosemead, say that up to 97 percent of business customers will see changes of less than 5 percent in their power bills. That’s because such businesses as restaurants and retail stores will see their power rates lowered from current levels during evenings, overnight hours and weekends. That should offset the relatively brief period during summer months when power rates will be at their highest.

Currently, most Edison small- and midsize-business customers pay a flat rate for electricity, averaging about 17 cents a kilowatt-hour. Under time-of-use, peak-use energy in summer months will cost 21 cents a kilowatt-hour; midpeak energy will hold at the current 17 cents; off-peak will be billed at 14 cents. (See chart.)

“There will almost always be some off-peak consumption that will be lower than the current average, which should balance out some of the higher rates,” said Russ Garwacki, SCE’s director of pricing design.

Garwacki said that of the 3 percent or 4 percent of businesses that see rate fluctuations of more than 5 percent, two-thirds will experience drops, while only one-third will see increases. Overall, SCE expects that only about 1 percent of its business customers – perhaps 5,000 or so – will see their power bills jump more than 5 percent.

But Sanchez isn’t buying that projection.

“I don’t know what set of assumptions Edison is using, but it sure doesn’t seem to apply to businesses in my position,” Sanchez said. “This whole business about shifting to off-peak times to lower my bill is meaningless for me, since my business is closed during off-peak hours and I use virtually no power then anyway. So the only direction my rates can go is up.”

Businesses skeptical

Likewise, Tom Benson, owner of Bud’s Beach Cities auto upholstery shop, said he has limited ability to shift to off-peak times. He believes his power rates could jump as much as 20 percent or even 30 percent during summer. He won’t allow the utility to upgrade his power meter.

“This whole program is merely a ploy by Edison and the other utilities to get more money from business,” Benson said.

To make time-of-use rate programs work, the utilities have spent the last several years and hundreds of millions of dollars installing new “smart meters” that give real-time readouts. Traditional meters only record the total power used over a month; the smart meters allow utilities to track how much power customers use at any time throughout the day. Customers themselves can also track their power use by the hour or even in 15-minute intervals.

“Explain to me what benefits this has besides the ability of utilities to charge us more to use electricity at 2 p.m. in the afternoon,” Benson said.

Futile upgrades?

He said that in the last couple of years, he has worked with SCE and the city of Long Beach to install energy-saving equipment, including new lighting and a new air compressor for his power tools.

“It’s cost me about $7,000, but I’ve succeeded in cutting my monthly power bill to about $300 a month from $800 a couple years back,” he said. “Now, with this time-of-use program, I fear that by next summer, my power bill will be back up to $500 or even $600 a month and there really isn’t much more I can do to save power.”

Print shop owner Sanchez said she has upgraded to energy-saving equipment, too.

“We’ve completely changed out almost everything that uses power over the last four years,” she said. “All that’s left is our 11-year-old air conditioner, and to replace that, I’m waiting to accumulate some savings from all the other improvements we’ve made.”

If her power bill goes up next year, she said that will eat into the budget for replacing the air conditioner.

The concerns of Benson and Sanchez point to a flaw with the time-of-use concept, according to a statewide non-profit group that primarily advocates for residential power customers.

“The big concern with time of use is that one size doesn’t fit all,” said Mindy Splatt, spokeswoman for the Utility Reform Network in San Francisco. “Some people will be able to shift their power use and save money; others won’t.”

Splatt said it’s much better to set overall power consumption thresholds and have time of use as an option.

“That way, you don’t get penalized if your business is one of those that really can’t shift the time of day you use your power,” she said.

SCE’s Garwacki at Edison said that regardless of time-of-use billing, companies can save money by reducing overall power usage by installing occupancy sensors that turn off lights when no one’s around, raising air-conditioning thermostat settings, replacing lights with lower-wattage versions and installing the latest energy-efficient equipment.

He also noted that customers should check to get incentives from SCE for taking certain energy-conservation measures.

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Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.