Utility company's diabolical rate plans don't save the consumer equivalent to what they conserve

Attached is a spreadsheet I created for a restaurant client comparing two plans and projected kWh savings at 20% and 30%.

Currently, they are on the rate plan "3B". If they were to remain on this plan and reduce their kWh usage by 30%, they would actually only save 16% on their utility bills.

But PNM (the local utility here in Albuquerque, NM) automatically changes the rate plan for their customers after the customer shows a three month timeframe of changed activity.

If we assume PNM changes the rate plan after three months of only 16% monetary savings (when they're actually saving 30% on kWh), the rate changes to "2A".

Am I delirious to assume that when a customer reduces their kWh (and even their demand load) by 30% that they should actually PAY 30% less? Why 21%?

I'm baffled at how this can actually be, how the utility company, in bed with the PRC (or vice-verse) can penalize a customer for saving energy.

Can someone explain this decision/jurisdiction/policy to me?

Tags: accuracy, actual, meter, plans, rate, savings, utility, vs

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There are more factors that come into play on commercial bills like demand charges, baseline, etc... They do save 30% on that one portion of the bill when they do reduce usage.

Well actually, no they do not save 30% on that one portion (rate per kWh). They actually lose about 35%. Which is why I posted this topic as I interpret this as diabolical. For example:

The peak rates per kWh for plan 3B are $0.0844232 (June - August) and $0.0699376  (Sept - May)

And the rates for plan 2A are $0.1286451 (June - August) and $0.1075914 (Sept - May)

Plug 1 kWh for each month in each cycle and you get a difference:

(3 x 0.0844232 = 0.2532696) + (9 x 0.0699376 = 0.6294384) = 0.882708

(3 x 0.1286451 = 0.3859353 + (9 x 0.1075914 = 0.9683226) = 1.3542579

So plan 3B (supposedly tailored for high consumers) pricing per kWh ends up being 65% as much as Plan 2A (supposedly tailored for lower consumers). But customers don't get to pick their plan, the utility company does.

I also ran the same numbers but used the non-peak times from plan 3B as a reference. Somewhere in between will be actual usage. What I come up with in this case is Plan 3B ends up costing 35% as much as Plan 2A. So on average, Plan 3B consumers pay 50% as much as Plan 2A consumers for consuming... more?

And herein lies my dilema. I believe something diabolical is afoot.

Ahh, sorry now I see the other tab. In all seriousness, you should consider siting down with an account rep & have them walk you through the system & plans so you can understand how it works. Trust me they are not diabolical & most are glad to help. They might even switch you to another plan that may work out better & possibly lock it in unless they start using more.  

Based on what I think I see on your spreadsheet is that they drop the demand & min base charge & place them on a flat rate. The flat rate now needs to include line maintenance, etc... (which used to be broken out & called demand). Along those lines it always has been the more you use or buy, the less you pay. Shoot what's the residential rate - do you think they should be paying that?

Now lets say they did leave you on the original plan - your 30% savings will only impact the total KWH used, not the demand charges which looks like it runs 30% to 50% of the bill depending on the month - thus you only see 16% or whatever savings  

Well Sean, I have in fact talked to the utility's commercial accounts manager about this and when I presented this data to him his response was something to the effect of "well those decisions are way above my pay scale" (those weren't his exact words).

I do understand how it works actually; I understand it completely. Customers who use less energy are penalized for doing so by not having billing that matches their reduction. That's painfully plain and simple.

As for the residential rate, commercial customers would be paying significantly more if they paid the residential rate.Who generates the most service calls? What is the percentage of residential customers to commercial customers? As far as residential costing more than commercial, I get that; it's about the aggregate labor and resources needed to support small customers compared to big customers. I get that completely. But if you take residential rates out of the picture altogether and focus only on commercial rates--after looking at the hard data--how can one accept a 30% reduction in kWh usage resulting in a 21% reduction in that actual rate?

This is the point to my statement of "diabolical".


I'm persuing this as we speak. I'm researching who to talk to about this and the agencies involved. I plan to get to the bottom of this with an explanation. When I do, I'll post the results of my battle with big oil and coal. Wish me lots of luck...

I hate to say this, but I don't think you get it. I don't think you fully understand how business runs, economy of scale, what it does take for the utility to provide power, nor what a base charge covers or is for.

Look when you are above X level - you pay X for the kwh's used along with a seperate & higher minimum base cost. If you use 30% less power, you don't pay for kwh's not used which is pretty simple BUT you still have that minimum base charge which means your bill does not go down 30% - it is only 16%

Now in your case, by using 30% less power, the economy of scale no longer applies, nor the justification for that huge minimum base charge. The new base charge now basically only covers paperwork and not what it really takes to make sure that the power you need it is there when you flip the switch which means a slightly higher kwh charge. Thus you are now only looking at a 21% cost reduction.

So which one would you like? I can tell you many power companies won't automatically switch you to the plan that costs less without you requesting it so in all honesty you ought to thank them

Rod, I have to go along with Sean on this,

Another way to look at this is to consider a small company with lower use and paying a higher rate.  They expand and triple their use and they get a lower rate as a result of their higher use.  If they later become more efficient and go back to the lower use they also go back to the higher rate.  Been here and done this and it is a pain, but it is not diabolical.



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