(Feb. 18, 2016) A missed peak in November will cause electric rates in Berlin to go up roughly $2 a month, as the town pays back a more than $400,0000 deficiency over the next three years.
Berlin Town Administrator Laura Allen said she became aware of the “peak-shaving issue” on Nov. 23, after receiving an email from Steve Miller, an analyst at Booth & Associates, Inc.
Booth & Associates was contracted by the town to identify when it should be generating power in order to hit certain peaks that trigger price breaks from Delmarva Power, which coordinates the movement of wholesale electricity through the regional transmission organization PJM.
“There are five coincident peaks [per year] that you have to hit in PJM to get a break on your electric rates,” Allen said. “On the 20th of February [2015], Booth didn’t tell us to peak shave … They were under the impression that the single-transmission peak only happened during the summer, and that turned out not to be the case.”
Peak shaving is the process of reducing the amount of energy purchased from a utility company during peak hours when charges are the highest. One way to reduce consumption is to generate a certain amount of offset energy back onto the grid.
Berlin’s electric utility uses Delmarva Power infrastructure to deliver energy to homes in the town, but purchases the actual power from an outside source. That system had helped lower the average electric bill in town during five of the last six years.
When Allen learned about the missed peak, she alerted Mayor Gee Williams and Electric Utilities Director Tim Lawrence, and contacted an attorney who advises the town on matters relating to the electric department.
The town was facing additional costs totaling $435,000, roughly half of which were triggered by the missed peak, Allen said. Other factors included anomalous weather and natural fluctuations within the system.
The additional costs would have led to a $10 per month increase in the average electric bill.
“Based on my conversations with the mayor, he and I decided that we wanted to try to figure out something to try and mitigate the impact on the customer,” Allen said.
To lessen the blow to consumers, the town used $100,000 in contingency funds budgeted for the electric department, and spread out the remaining balance over three years, starting this month.
That had to be approved by the Public Service Commission, which signed off on the plan on Dec. 8.
In the future, Allen said American Municipal Power Inc. [AMP] would take on some of the responsibilities of Booth & Associates, including identifying peak shaving. Berlin signed with AMP in February of last year, joining a pool of more than 130 municipalities to increase its purchasing power.
Despite the problem, Allen said the town has largely had good dealings with Booth & Associates, dating back to 2008.
“They’ve done a good job for us,” she said. “They helped us drop the cost of power pretty consistently over the years, and they’ve saved the town over $3 million from this peak shaving process.
“It’s difficult when you’re working with somebody who makes a mistake because you start to wonder, can I really trust these people, but they understand the reason for the mistake,” Allen continued. “We’ve set it up so we never have that problem again, but I don’t want to lose sight of the fact that they have done a good job by the town up until this point.”
She added that town does not plan to take any additional actions – for now.
“We’re looking at what our options might be in that area to figure out what would be the best course of action,” Allen said.
Overall, she said the town’s electric rates were still “lower than most” municipalities in the area.
“My understanding is, at one point Berlin was the most expensive in the nation,” Allen said. “That’s certainly not the case anymore. We’re very competitive, and we’re even significantly lower today than we have been in the last couple of years. The customer will be paying more for electricity, but the rate overall is still lower than it has been historically.”
Berlin Town Administrator Laura Allen said she became aware of the “peak-shaving issue” on Nov. 23, after receiving an email from Steve Miller, an analyst at Booth & Associates, Inc.
Booth & Associates was contracted by the town to identify when it should be generating power in order to hit certain peaks that trigger price breaks from Delmarva Power, which coordinates the movement of wholesale electricity through the regional transmission organization PJM.
“There are five coincident peaks [per year] that you have to hit in PJM to get a break on your electric rates,” Allen said. “On the 20th of February [2015], Booth didn’t tell us to peak shave … They were under the impression that the single-transmission peak only happened during the summer, and that turned out not to be the case.”
Peak shaving is the process of reducing the amount of energy purchased from a utility company during peak hours when charges are the highest. One way to reduce consumption is to generate a certain amount of offset energy back onto the grid.
Berlin’s electric utility uses Delmarva Power infrastructure to deliver energy to homes in the town, but purchases the actual power from an outside source. That system had helped lower the average electric bill in town during five of the last six years.
When Allen learned about the missed peak, she alerted Mayor Gee Williams and Electric Utilities Director Tim Lawrence, and contacted an attorney who advises the town on matters relating to the electric department.
The town was facing additional costs totaling $435,000, roughly half of which were triggered by the missed peak, Allen said. Other factors included anomalous weather and natural fluctuations within the system.
The additional costs would have led to a $10 per month increase in the average electric bill.
“Based on my conversations with the mayor, he and I decided that we wanted to try to figure out something to try and mitigate the impact on the customer,” Allen said.
To lessen the blow to consumers, the town used $100,000 in contingency funds budgeted for the electric department, and spread out the remaining balance over three years, starting this month.
That had to be approved by the Public Service Commission, which signed off on the plan on Dec. 8.
In the future, Allen said American Municipal Power Inc. [AMP] would take on some of the responsibilities of Booth & Associates, including identifying peak shaving. Berlin signed with AMP in February of last year, joining a pool of more than 130 municipalities to increase its purchasing power.
Despite the problem, Allen said the town has largely had good dealings with Booth & Associates, dating back to 2008.
“They’ve done a good job for us,” she said. “They helped us drop the cost of power pretty consistently over the years, and they’ve saved the town over $3 million from this peak shaving process.
“It’s difficult when you’re working with somebody who makes a mistake because you start to wonder, can I really trust these people, but they understand the reason for the mistake,” Allen continued. “We’ve set it up so we never have that problem again, but I don’t want to lose sight of the fact that they have done a good job by the town up until this point.”
She added that town does not plan to take any additional actions – for now.
“We’re looking at what our options might be in that area to figure out what would be the best course of action,” Allen said.
Overall, she said the town’s electric rates were still “lower than most” municipalities in the area.
“My understanding is, at one point Berlin was the most expensive in the nation,” Allen said. “That’s certainly not the case anymore. We’re very competitive, and we’re even significantly lower today than we have been in the last couple of years. The customer will be paying more for electricity, but the rate overall is still lower than it has been historically.”