New York City has some of the highest electricity prices in the nation, surpassed only by Hawaii. Consolidated Edison applies different rate schedules that vary depending by consumer profile, but residential clients can expect to pay over 23 cents per kilowatt-hour, on average.

When electricity is expensive, energy efficiency and renewable generation become much more valuable investments for your building: remember that the average electricity price throughout the USA is around 12 cents per kWh. In other words, energy-saving projects for NYC buildings yield savings that are twice as high when compared to the national average.

How Is an Electricity Bill Composed?

Most residential electricity bills are calculated based on monthly kilowatt-hour consumption, plus a small fixed fee. Large residential developments, commercial clients and industrial facilities are normally subject to additional charges beyond an energy rate.

Demand Charges

Demand charges are not calculated based on total kilowatt-hour consumption, but rather based on the maximum demand over a specified period – typically per day or per month. Some rates combine normal energy rates and demand rates, while others apply demand charges exclusively.

The goal of demand charges is to disincentive peaks in consumption, since they can bring the power grid to its limit when they occur simultaneously for many buildings.

Reactive Power Charges

Transformers and motor-driven equipment draw two types of electric power. Most of the power drawn is converted into mechanical shaft work, but a portion is used to magnetize ferromagnetic cores, oscillating back and forth between the point of use and the grid. This oscillating component is called reactive power, and many rate schedules include an extra fee because it burdens transmission lines, even if the consumer returns it to the power grid.

Kilowatt-Hour Pricing

The energy rate normally takes one of the following forms, and a single rate schedule may combine two or more of them:

• Fixed Rate: The simplest type of electricity bill, where a flat rate is charged per kWh regardless of the hour.
• Incremental Rate: All kilowatt-hours below a specified threshold are billed at a lower rate, and any consumption over the threshold is billed higher.
• Hourly Rate: Some customers are subject to fees that vary throughout the day, depending on total power grid demand. When demand is low, Con Edison can operate with only the cheapest power plants available, charging the lowest rates in the day; on the other hand, under high demand conditions it is necessary to bring the most expensive energy sources online, and the highest rates are billed.
• Seasonal Rate: This pricing option is like hourly rates, but applied to a yearly period. In general, summer rates are higher because air conditioning equipment is used more extensively. Winter rates are lower because New York City uses steam and gas for most heating needs, alleviating the load on the power grid.

Keep in mind that different pricing options may be combined. For example, some rate schedules may apply two sets of fixed rates throughout the year, one for the cooling season and one for the heating season. The same principle can be applied to hourly rates, where peak demand rates during summer are higher than in winter.

Consolidated Edison Service Classification

The rate schedule that applies for each customer is determined by various factors, including type of occupancy and electric demand. Consolidated Edison has many customer categories, and the best way to summarize them is with a table.

Many rate schedules use the term standby service, which refers to a power supply that replaces or supplements a self-generation facility owned by the client. In other words, standby service rates are intended for clients who generate their own energy but wish to have a backup power supply.

Electricity Bill Reduction Strategies for Different Rates

When energy consumers understand their rate in depth, it is possible to deploy the most effective strategies according to the billing structure. Reducing the total kilowatt-hour consumption almost always results in a utility bill reduction, with the only exception being the rates that only bill for demand and reactive power.

Reducing Demand Charges

The most effective way to reduce demand charges is preventing the simultaneous use of many pieces of equipment with a high rated power. Normally, the best way to accomplish this is through automatic controls.

Energy efficiency upgrades that target constant power equipment can also reduce demand charges. LED lighting retrofits are a great example, since they remove a fixed number of kilowatts from total demand permanently. On the other hand, upgrades to cycling or variable-power equipment may also yield demand savings, but they are not consistent because there is still a change of a high coincident load. Peaks in demand can also be mitigated with on-site generation, but it only makes sense financially if the running cost of generation equipment is lower than the corresponding demand savings.

Reducing Reactive Power Charges

The way to reduce reactive power charges is straightforward: capacitor banks can be installed to provide reactive power on-site, removing the item from the power bill. If the installation uses many synchronous motors, they can also be set to operate as net generators of reactive power, reducing the amount billed.

Also keep in mind that older motor equipment tends to have a lower power factor. When you carry out equipment upgrades, it is very likely that your reactive power charge will be reduced.

Hourly Energy Rates

Depending on consumer profile, hourly rates can be mandatory or optional. A switch to hourly rates can either increase or decrease your bills, depending on how you manage your consumption:

• If most of your electric appliances must operate at fixed hours, with little flexibility to change their schedule, hourly rates can drastically raise your utility bill.
• On the other hand, there are significant savings to achieve if your loads are flexible in terms of schedule. There are rates where the peak hour energy price is over 30 cents per kWh, and the off-peak rate is slightly over one cent per kWh.

Energy storage is a viable option to move energy consumption from peak hours to low-demand hours. The two most common options are batteries, which store energy electrically; and thermal storage, where hot water or ice is stored during off-peak hours to meet heating or cooling needs when peak rates are being applied.

If hourly rates are optional for you, make sure you get a proper assessment of your consumption to determine if the change makes sense financially. An energy audit from a qualified engineering firm or consultant is highly recommended.