It's been my experience that people take a far closer look at their electric bill from their home than they do at their office. This makes sense: you feel like you have more control over your personal energy usage. Plus, many people don't even see their electric bill at work. And if you do take a glance at it, the complications of the bill probably just have you scratching your head, as it's a far more complicated looking animal in the commercial space. It's easier to simply send it straight to Accounts Payable and get entered as just another cost of doing business.

Come budget time, you may have a meeting and see that cost bundled into a Building and Maintenance entry or maybe your more detailed and it fall under a more appropriate header such as Utilities, hidden alongside your phone and internet usage. Whether you do this yourself or have someone overseeing that segment of your business, it's likely that you simply plug in a 10% increase annually into the spend rate there and you've covered your budget expense for that category.

This is logical. It's understandable. But it's wrong and it's time you take a hard look at your electricity bill, understand this expense your business is paying out every month and learn what you can do about it.

Let's review first the primary differences in your electricity bill here in a general sense for Southern California as an example. There are many different rates available from your electricity provider, but we'll make this very simple and review the basics here: tiered in Domestic versus a General Service commercial rate. In residential you may have viewed your bill under a routine "D" (for Domestic) rate charge and seen that there are tiered levels of service: many now down to three or four levels. The first is a simple baseline and Tier 1 is a pretty nice price point and if you can keep it there, life is good. But most of us will get to Tier 2 pretty quickly and see a slight jump and in no time at all you're hitting Tier 3 where it may more than double your baseline kWh rate and a Tier 4 soon follows with even higher rates.

Here is a sample residential Tier flow from the SCE site:

It's pretty simple though: lower your usage each billing period and you'll lower your rates. This allows for residential solar to blossom by keeping your usage in that lowest tier rate overall and offsetting your electric bill at the higher tiers.

In commercial billing though, there are a multitude of rate codes, from GS-1 to GS-3 (General Service) and multiple TOU (Time of Use) options...over 20 different Rates Pricing on the Regulatory page of Edison for General Service - Industrial Rates alone.

It's enough to make your head spin as fast as your old meter!

What to choose? Well, they'll make that part easy for you under certain provisions of the PUC in easy-to-understand language like this (from SCE's Revised Cal. PUC Sheet No. 55930-E): Applicable to single- and three-phase general service including lighting and power customers whose monthly Maximum Demand registers, or in the opinion of SCE is expected to register, above 20 kW and below 200 kW. The customer whose monthly Maximum Demand, in the opinion of SCE, is expected to reach 200 kW or has reached 200 kW for any three months during the preceding 12 months is ineligible for service under this Schedule. Effective with the date of ineligibility, the customer’s account shall be transferred to Schedule TOU-GS-3. Further, any customer served under this Schedule whose monthly Maximum Demand has registered 20 kW or less for 12 consecutive months is eligible for service under Schedule GS-1.

Oh. What? Maximum Demand? What is all this? I'm just trying to run a business here!

I know; you didn't look that far into the bill, like the page 3 sample below before shipping it off to AP with a despairing shrug of the shoulders. Most likely you were never told how electric use is billed for commercial accounts at all, much less have a profile in usage patterns provided for your facility.

Here's how this generally works: in addition to charging you for your energy consumption in simple kWh during peak and off-peak hours, your meter usage will reflect your highest usage point in any fifteen minute period and designate that as your Maximum Demand. In other words, your Maximum Demand is based on the highest level of electricity supplied at any one time during the billing period. This not only puts you into a billing rate category, but in commercial electric rate terms will be the basis for a higher rate and when you add the delivery charges and peak versus off-peak and taxes and all, it may account for approximately 50% of your monthly electricity bill.

Take a look at this sample SCE bill from a small business on Time of Use, General Service-2 rates and notice the various demand rates circled which total over $900 of their $1767.38 bill that month:

We're not talking "fair or unfair" here; simply pointing out reality. However, knowing this may allow you to change some of your patterns of behavior to keep that in check and in many cases save significantly.

Understanding your power profile is truly powerful, because what gets measured gets done. If you come into the facility every morning at 7am and turn everything on at once, you've created your Maximum Demand at a highly inflated rate. If you can wait and turn on certain sections at fifteen minute intervals, you can control that cost a little more with a simple change in behavior.

This is obviously a very simplified look at a fairly complex system and it's understandable if your team is not on top of this aspect of your costs. You have a business to run. But if you have a team member who has taken the time to investigate these costs, give them a raise and give yourself a pat on the back for hiring them! And if you haven't yet, take the time to assign this task to investigate further.

There are a lot of costs to doing business you have to account for, but you should no more accept your utility's monthly charges at face value than you would accept a carte blanche charge for your new phone system or internet provider. Understanding your electricity costs and taking control of your usage allows you to remain competitive and will likely be an advantage for you that your competitor hasn't taken the time to understand as you now have.

Understanding the differences between your commercial and residential electric bills