You might understand that electricity is just electrons. So when you think about your electricity bill, you might think of it as the price you pay for the cost of generating the electrons. But that cost only makes up a portion of your electricity bill. If you have a home or business in the northeast then a large portion of your electricity bill is probably going towards something called your capacity Peak Load Contribution (PLC).
Capacity is the maximum amount that something can contain, so in the electricity market your capacity PLC is your demand (how much electricity you need at one particular moment) when the whole system is at its maximum demand. When the system is at its maximum demand electricity prices tend to be the most expensive because more generators need to be online and the system infrastructure is more stressed. This typically happens on the warmest days of the summer due to the high electric usage needed for A/C units. To prevent blackouts and other issues the system needs to be prepared for these peak demand days and they do that by charging each customer a “capacity cost” based on their Capacity PLC.
For example, in PJM (the organization behind energy transmission in all of our service states except NY & TX) your Capacity PLC is calculated by taking the average of your usage during the 5 hours deemed peak by PJM for the previous year. For the June 2021 – May 2022 planning year it’s the 5 hours called ‘Summer 2020 RTO Coincident Peaks’ in this link. You’ll notice these peaks all occurred in the afternoon/evening of weekdays in July. This is typical.
If you have your energy supplied by the utility your capacity cost will be your Capacity PLC times a utility-determined multiple. This cost will change every year.
This is where we come in! We can find you a supplier who will lock in your capacity costs at a fixed level as a benefit to you! We can even have that beneficial rate locked in for several years so you won’t get hit with unexpected cost increases when your capacity PLC or the ‘utility multiple’ increases! Maybe you’re expecting an atypical summer with an unusually high or low capacity PLC? Contact us today. We will help you select the right product, supplier, and contract term to meet your individual needs and get you the lowest rate possible going forward.