By Michael DeCaluwe
Frequently, we see transmission rate changes that impact the costs on your electricity bill. Understanding these changes and what you can do to counteract them can help you control your annual electricity costs.
What are transmission charges on your electric bill?
Transmission charges are the costs associated with operating the electrical “grid.” The grid is composed of large high-voltage wires that you see running across the country that have a “zipping” sound to them. These wires are managed by an RTO (Regional Transmission Organization).
Your local electric utility pulls power from these wires and delivers it to your home or business at a voltage level that’s safe for consumption.
Depending on the market, transmission costs are usually part of a supplier’s cost or rate and are separate from the delivery costs charged by your local utility.
How are transmission rates determined?
Transmission costs are usually based on an RTO’s rate schedule. That schedule is approved and regulated by the Federal Energy Regulatory Commission (FERC).
Transmission costs typically have two moving components: the RTO’s rate schedule that may vary each year, and your account’ annual demand values that will also fluctuate annually.
When a supplier “locks” your transmission costs for a specific term, they take the risk that your demand values will not go up (resulting in higher costs) during the term of your agreement. They also take the current cost of transmission into account when fixing your rate.
2020 Transmission Rate Increases
FERC just approved an update to transmission costs for many of the delivery areas in PJM, the largest RTO (grid operator) in the United States. As a result, most areas are seeing an increase in their transmission costs.
Here’s a look at those updates:
Depending on the supplier, some customers may see an adjustment to their transmission costs on their upcoming electric bills.
What can you do to lower your transmission costs?
Lowering your electricity usage at peak times can impact both your capacity and transmission costs going forward. One way to do this is to receive Peak Day Alerts, which tell you the date and time that a peak day may occur. These alerts help you plan to reduce your usage during those peak times.
If you’re interested in receiving Peak Day Alerts or have any other questions about capacity and transmission costs, feel free to reach out to us.
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