Residential Demand Charge

As a consumer-owned not-for-profit utility, Benton PUD exists solely to operate in the best interest of our customers.  And we know affordable, reliable, and environmentally responsible electricity is critical to your health, safety, and well-being.

In addition to ‘keeping the lights on,’ it is our job to be forward-thinking and to anticipate and plan for increases to our costs, which are your costs.  With some of the most aggressive clean energy laws and regulations in the nation, including the Clean Energy Transformation Act (CETA) and Climate Commitment Act (CCA), Washington State’s unprecedented regulation of electric utilities is beginning to put a premium on the cost of supplying electricity during the hours of the day when customer demand is the highest.  Think early morning and late evening during winter cold and early evening during summer heat.

We know energy policies can be confusing and politically polarizing, but the simple fact is that electricity is a just-in-time service where the unforgiving laws of power grid physics requires the supply of electricity to precisely match demand on a minute-by-minute basis.  While we are just beginning to experience increasing cost pressure during high customer demand periods, we anticipate this pressure will grow over time as utilities are forced to rapidly replace controllable, dependable, and affordable technologies with intermittent and variable wind and solar to satisfy CETA’s 100% non-greenhouse-gas emitting electricity requirements.  

While it is true, with the help of generous tax subsidies, the costs for individual wind and solar farms have gone down in recent years, their inability to produce electricity in a controllable pattern matching customer demand comes at a high net cost due to the need to overbuild these technologies.  Overbuilding means you must pay for multiple wind and solar farms to increase the probability that the total actual generated electricity derived from the sun and wind will be enough to meet customer demand across a wide range of weather and temperature conditions. But wind and solar are far from a perfect replacement of dependable technologies which means backup technologies must be in place and paid for, even if they only run part of the time.  While energy storage technologies like batteries are beginning to be installed, they have serious operational limits.  And no matter what form it comes in, energy storage will add significant costs to electricity due to the very large scale and redundancy needed to make a difference in power grid reliability.

While CETA’s 100% non-emitting electricity generation requirement by 2045 may seem like a far-off date, the effects of CETA’s post 2025 prohibition on coal-fired baseload generation and punitive financial penalties for using natural gas generation beginning in 2030 are impacting electric utilities like Benton PUD today.  Additionally, the CCA has already added significant costs to the wholesale electricity market during high demand periods by adding a carbon tax to the cost of controllable natural-gas-fired generation needed currently for balancing electricity supply and demand on the hottest and coldest days of the year.

The bottom line is the costs of backup technologies, plus the costs of wind and solar overbuilds and the batteries they need to overcome their inherent operational deficiencies will increase the cost for utilities to maintain power grid reliability.  And these increased utility costs are well established, particularly in states like California where some residential retail electricity prices are more than four times higher than what Benton PUD’s customers currently pay.

Fortunately, Benton PUD’s over 90% non-emitting, affordable and reliable hydro and nuclear wholesale power supply portfolio is helping keep our prices in check for now.  But hydroelectric dams can only do so much.  And while they too are a controllable source of electricity, they also represent variable generating technology with electricity output dependent on available water in the rivers, which can vary significantly from year-to-year and month-to-month.  Additionally, in attempts to improve salmon runs, the generating capability of hydroelectric dams has been reduced significantly over the years by routing unprecedented amounts of water through spillways rather than through turbine-generators.  And calls for even more ‘spill’ continue to be a part of ongoing litigation related to dam operations which could further diminish the amount and flexibility of hydropower in the future.

So how is Benton PUD responding to the increasing cost of grid reliability? First, we started by requesting a change to our wholesale electricity supply contract which was approved for implementation by the Bonneville Power Administration beginning October 1 of this year.  This contract change gets Benton PUD out of the business of transacting directly in wholesale electricity markets which are becoming more volatile and uncertain in terms of price and availability of dependable generating supplies.  Second, we are implementing a change to our residential rate design to send a small price signal incentivizing customers to consider shifting some of their electricity use to hours other than those corresponding to periods of maximum power grid demand.  This type of charge for demand has been in place with Benton PUD’s commercial, industrial, and large irrigation customers for most of our 77-year history, so it is not a new concept.  And while some costs of regional power grid generation and transmission has been included in longstanding demand charges, historically the biggest cost drivers were utility investments in equipment and wires required to avoid overloading local community electric delivery systems during high customer usage periods.   

Maybe you’ve never thought of it before,  but electricity demand on the power grid reflects the rhythm of modern human life. Tracing out a curve with a generally predictable shape and maximums at points in time when people are awake and simultaneously using the most electricity: making hot water, heating or cooling the house, getting ready for work, preparing meals, doing laundry, charging your electric vehicle, etc.  This means that at certain times of the day, people are collectively using more electricity than other times creating a higher demand on the electrical grid, which we have established requires controllable and dependable generating technology to respond.

Our goal is to keep rates as low as possible and we want to work with our customers to achieve that.  Through investments we have made in Advanced Metering Infrastructure, we are in a position to improve our residential retail rate design and to give our customers the ability to choose to change their electricity usage to lower costs or decide to pay a small premium when using electricity during peak periods. Starting in November, residential customer bills will incorporate a demand charge.  The demand charge will be based on a customer’s highest one-hour of usage in peak periods and be $1/kilowatt.  To make this change in a manner that does not result in overall increased revenues for Benton PUD, our residential energy rate, which represents the majority of a customer’s bill will decrease from 7.39¢/kWh to 6.88¢/kWh.  The change will charge customers that have higher usage during peak hours a premium, and provide an opportunity for customers to lower their bill by decreasing usage during peak hours.

While this may sound complicated, it really is as simple as managing how many appliances and what electrical equipment is being used at once.  Spreading out the use of appliances and equipment during peak periods lowers a customer’s demand, resulting in a lower demand charge. Benton PUD provides an online portal, SmartHub®, where you can view and monitor your usage; identify trends of when your peak demand is occurring; and determine how you may modify future electricity usage patterns if desired.   

For the vast majority of customers, the new rate structure will result in a change to the monthly bill of $5 or less on average, either as a reduction or an increase.  And it sets the framework for a more fair and appropriate collection of revenues that better aligns with Benton PUD’s costs.  Benton PUD has a longstanding tradition of forward-thinking. Looking ahead, the implementation of a residential demand charge is a small incremental change to put in place, so our customers have as much control as possible in determining how much they pay for electricity on our way to meeting the state’s requirement to be 100% carbon free by 2045.