JAMES N. PHILLIPS, P.E., CEM, SR. UTILIZATION ENGINEER LONE STAR GAS COMPANY, DALLAS, TEXAS

UNDERSTANDING UTILITY RATES OR

HOW TO OPERATE AT THE LOWEST $/BTU

JAMES N. PHILLIPS, P.E., CEM, SR. UTILIZATION ENGINEER LONE STAR GAS COMPANY, DALLAS, TEXAS

ABSTRACT

This paper is intended to give the reader knowledge into util i ty marketing strategies, rates, and services. Although water is a utility service, this paper will concern itself with the energy utilities, gas and electric.

commonality and diversity exist in the strategies and rates of the gas and electric utilities. Both provide services at no charge which make energy operation for their customers easier, safer and more economical.

It is important to become familiar with u t i l i t y strategies, rates, and services because energy knowledge helps your business operate at the lowest energy cost ($/BTU). STRATEGIES

u t i l i t y strategies encompass the areas of energy, efficiency, and customers. All utilities have the goal of increasing energy consumption by adding new customers or new energy using equipment for existing customers.

Gas utility Strategies:

1. Increase total consumption especially in the summer "off-peak" months by new gas equipment purchases. 2. Retain current customers

from other energy company encroachment.

3. Replace electric or other fuel equipment with gas using equipment.

4. Promote new gas technology equipment.

5. Lower rates for increased consumption.

6. Encourage Supply Side Management (SSM).

Electric Utility Strategies: 1. Reduce demand (KW) peaks while increasing energy

(KWH) consumption. 2. Retain customers from

other utility encroachment 3. Replace other energy fueled

equipment with electric equipment.

4. Promote new electrical technology equipment. 5. Encourage Demand Side

Management (DSM).

6. Develop new rates which more accurately reflect capital and operation costs.

Demand side energy consumption (DSM) favors electric equipment because energy used by a specific ~iece

of equipment is measured at the customers meter. The lower the energy rating (KW/Ton or KW/HP or KW/BTU) the more efficient the equipment and the less demand draw on the electric power plants, thereby reducing the need to build new power plants. To encourage DSM, utilities give rebates for high-efficiency equipment and technologies that shift demand from peak (high load) times, specifically summer afternoons, to low demand times, such as late night to early morning.

Rebates paid to qualifying customers are generally "rate based" (costs are averaged into all customer's bills).

Supply side energy consumption (SSM) favors gas fired equipment because of the inefficiency of energy conversion at electric power plants. A 78% gas furnace is more energy efficient than a 100% electric heater.

1. 12,821 Btus of fuel are needed for a gas furnace to produce 10,000 Btus of heat.

2. 33,333 Btus of fuel are needed to produce 10,000 Btus of electric heat.

sixty-six percent of a fuel's energy is lost in the conversion from fuel to electricity. Companies concerned with the environment and energy conservation are SSM conscience.

SSM is an overall view of energy; DSM is concerned with economics; both are important to efficiency. Cogeneration power plants provide the best overall energy efficiency, providing both DSM and SSM utilization.

Both gas and electric utility strategies endeavor to lower rates for increased energy consumption. The more energy used, the cheaper the cost per uni t of energy. Either a step system ($X for Y energy; $X+ for Y+ energy; $X++ for Y++ energy) or a seasonal system ($X for summer energy and $Y for winter energy) is generally used. Gas utilities seek to especially increase summer consumption to level their monthly sales because much of their present load is winter heating. Electric utilities, on the other hand,

desire a base energy consumption consisting of lighting, motors, electronics and other devices that operate long hours each day. It is equipment that cycles or operates during peak months of the year that cause demand problems. Demand without significant energy consumption is detrimental to the electric utility. winter heating load helps to balance the summer cooling load.

New technology promotion by the util i ties is good for all concerned; the customer, the nation, and the utilities. More eff icient equipment lowers the operational cost to the customer, uses less natural energy resources, and allows the utility to gain consumption by equipment replacement using competing utility's energy. New electric equipment promotion includes thermal storage, heat pumps, motors and high-efficient lighting. New gas equipment promotion includes absorption chillers, gas-engine c h i l l e r s , cogeneration, desiccant dehumidifiers, gas heat pumps, and hydronic heating.

All of these strategies are geared towards maintaining and gaining customers. The best means to obtain this goal is to serve the customer better with better equipment, better rates, and better service.

RATES

Knowledge of utility rates is probably the most critical energy information one can learn since rates determine the economic efficiency of energy. Gas and electric utilities have elements in their rates that are common and elements that are different.

Gas Rate'Elements 1. Customer charge 2. Energy charge

3. Fuel cost adjustment 4. Btu or weather

neutralization charge Electric Rate Elements 1. Customer charge 2. Demand (KW) charge 3. Energy (KWH) charge 4. Fuel cost adjustment 5. Power cost recovery

(cogeneration) charge 6. Ratchet charges

customer charges cover the installation and monthly reading of the meter. Demand charges cover the cost to build the power plant necessary to provide instantaneous power. Energy charges pay for the operation of the util i ty energy system. Fuel cost adjustments pay for the varying cost of fuel. The charge can be either positive or negative based on the monthly fuel cost compared to a standard cost. Btu adjustments oblige each customer to pay for the actual amount of energy in a cubic foot of gas (it can vary from 900 Btus to 1,200 Btus) .

Weatherization adjustments are the equivalent of average billing to the gas utility. In a mild winter, a customer will pay more per therm of gas compared to a cold winter in which he will pay less. Power cost recovery charges pertain to the cost to purchase electricity from a third party, generally a cogeneration plant. Ratchet clauses are a payment for using large quantities of power only in peak months or peak hours. A 70% ratchet means that a customer will pay for the actual maximum demand used in the period or 70% of the demand used in the peak

time, whichever is greater. This causes each customer to pay their fair share of the construction of the utility's power plants.

utilities segregate their rates into consumption categories: residential, the lowest usage; commercial, medium usage with a low load factor; and industrial, high usage with a high load factor. Load factor is the ratio of peak power to average power consumption. High load factors are the cheapest per energy unit. Some utilities have special rates to encourage economic development or transportation rates whereby another's energy is transported in the util i ties 1 ines. (A chart of some electric and gas rates in Texas, as well as sample gas rates are included at the end of this paper.) SERVICES

Finally, both utilities seek to provide various services, many times at no charge to their customers. These services may include computer cost analyses, energy audits, 1 ine locating, emergency services, and billing assistance along with seminars, newsletters, and other special programs.

Line locating and emergency services not only make business life and operation easier for the customer, but are a safety service which benefits both the customer and the utility.

Energy audits and computer analyses are handled by technical specialists. They help the customers analyze their use of energy and recommend more efficient ways to use the energy. They keep their clients informed about

new technologies and are always

on the lookout to convert

equipment to their energy

supply. Remember! This is

usually, and should be, for the customer's good as well as the utilities advantage.

The computer analyses help

the customer decide the

economic viability of new high efficient equipment versus low cost equipment or gas versus electric equipment depending on the required rate of return and payback time. (Sample analyses from Lone Star Gas Company are included at the end of this paper. )

utilities, either alone or

in conjunction with other

associations, sponsor seminars and conferences or participate in such as exhibitors in order

to showcase the latest

equipment technologies that use their energy, new rates, or new $ervices. For a customer, this is an excellent way to gain much valuable knowledge in a short period of time.

Newsletters are another

way utilities communicate with their customers about issues pertaining to their industry. These are generally free and are mailed quarterly to anyone

interested. Call your local

utilities marketing department

to get on the newsletter

mailing list.

other services offered by

utilities include equipment

testing and demonstrations,

incentive programs, coopera t ive advertizing programs, equipment

videotapes, s I ide presenta­

tions, economic development

programs, and of course rate and contract discussions.

The purpose of a utility is to provide energy and energy services to enhance the quality

of life through comfort,

reliability, and value. Service

should be prompt, courteous,

efficient, and satisfy the

customer's requirements while being committed to safety and the environment.

You, the customer, can cut your energy costs if you will learn about energy strategies and rates and use the utility's

services. Call your utility

companies and get a copy of their rates and if they are confusing, have them explained.

Know how they affect your

business operation. Sign-up

for all the free information

they provide. Go to the

seminars: i t will be time well

spent. Use their energy

specialists and obtain an

energy audit and a computer

analyses for each significant

piece of equipment. Discuss

the advantages of various rates

and contracts. Remember, to

lower your energy operation

costs, you must take the first step - Call Your utilities.

ACKNOWLEDGEMENTS

I wish to thank the

following persons for their

help in supplying information about their utilities rates and services:

Bob Allwein, Oklahoma Natural Gas Company.

Dick Landry, Gulf States Utility.

Curtis Williford, Entex Gas Company.

Bret McCants, Central Power and Light Company.

Frank Tanner, Southern Union. Patric Coon, West Texas

--I

1991-1992 COMMERCIAL ELECTRIC RATES IN NORTH TEXAS

CHARGES FUEL OTHER ENERGY DEMAND CUSTOMER RATE UTILITY -_.. _" ($/KWH) ($/KWH) $0.0192 ($/KW) ($/KWH) (KWH) ($/MTH.) $0.0009 $0.0572 x <-2500 >10KW $6.80 $15.00 GS TUE PCRF $3.9800 x (KW-10) $0.0300 x next 3500 80% Ratchet 0.0066 x >6000 WTU $0.0173 0.0474 Winter GS 0.0574 Summer $0.00 $6.50 CS $0.0173 TX.N.M. 0.0048 $9.33 $30.00 $0.0093 $0.0005 Summer> 0.0790 x 980 $1.00 $17.00 GS-3PH PCRF Winter» $0.0560 x >980 $0.0485 x >980 LSG-A $1,205.00 $10.65 $0.0307 $0.0093 75% Ratchet >100K\fIJ $0.0217 $78.79 $5.27 $0.0327 Ratchet

=

>5KW GS GSU 50%<500KW 75%>500KW DENTON $0.0337 $0.0190 50% Ratchet COUNTY $25.00 $9.35 1-102 Summer CO-OP $8.26 Winter COLLEGE LP-1 $15.00 $12.00 $0.0199 x <50000 $0.0065 60% Ratchet STATION $0.0165 x >50000

!TYPICAL

GAS

COMPANY

RATES.

COMMERCIAL:

CUSTOMER (METER) CHARGE ENERGY CHARGE

GAS COST ADJUSTMENT (GCA)

$10.00

$5.00 ave. per MCF $0.15 ave. per MCF NOTE: Different for every city

No Demand No Ratchet

f-COMMERCIAL GAS COOLING CONTRACT:

Cost of Gas + $0.25 per MCF; (or approximately $4.00 per MCF) NOTE: Three (3) year contract

Summer months (May - October) Applies to qas coolina load onlv INDUSTRIAL:

RATE #1 125 MCF/Month min. $1.58 /MCF + GCA

RATE #2 600 MCF/Month min. $1.43 /MCF + GCA

RATE #3 1,200 MCF/Month min. $1.37 /MCF + GCA NOTE: GCA = $2.73/MCF ave.

Requires minimum "Take or Pay" Gas is curtailable

INCREMENTAL TRANSPORTATION COOLING CONTRACT:

Third Party or "Spot Market" Gas $1.75 /MCF (1/25/93 value)

Transportation Fee $1.00/MCF

Curtailment Backup Fee (Optional) $0.25/MCF

ANALYSIS for

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by

LONE STAR GAS COMPANY JIM PHILLIPS, P.E., CEM

IEQUIPMENT D A T Ai IENERGY DAT Ai

KW Gas Rate: $4.86 per MCF

Generator Size: 5"00

Coqen Rate: $3.00 Iper MCF Recoverable Heat: 4.3' _IMMBH_{_}

Fuel Consumption: 8.0 MCFH Electric Rate

$6.80 perKW Demand:

Hours of Operation

Months

6,000 Hours per Year

Electrical: Months: I 12

$0.0360­ per KWH Thermal: 6,000 IHours per Year Energy:

(FCA included} Boiler Efficiency: 80 % % Gas Thermal: 100 %

Maintenance Cost: Estimated Cost: $1.75 per Hour $600,000 Installed I % Electric Thermal: Chiller Tonnage: Chiller Eft.:

o

%

°

Tons

o

KWfTon

-AVOIDED ELECTRIC ENERGY COSTS:

DEMAND: ELECTRIC DEMAND RATE" GENERATOR SIZE" MONTHS OF OPERATION= I $40,800] ENERGY: ELECTRIC ENERGY RATE" GENERATOR SIZE" HOURS OF ELECTRIC

OPERATION=

I

$90,000

I

AVOIDED THERMAL ENERGY COSTS:

GAS HEATING: GAS RATE" RECOVERABLE HEAT" HOURS OF THERMAL OPERATION/

BOILER EFFICIENCY=

I

$156,7351

ELECTRIC HEATING: ELECTRIC ENERGY RATE" 293 KWH/MMBH" RECOVERABLE HEAT"

HOURS OF THERMAL OPERATION + ELECTRIC DEMAND RATE" RECOVERABLE HEAT" 293 KW/MMBTU" MONTHS OF OPERATION=

I

$01

ELECTRIC COOLING: ELECTRIC ENERGY RATE" CHILLER TONS" KWfTON" HOURS OF THERMAL OPERATION + ELECTR,IC DEMAND RATE" CHILLER TONS" KWfTON" MONTHS OF OPERATION= I $0 I

COGENERATION COSTS:

FUEL: COGEN RATE· CONSUMPTION/HOUR" HOURS OF ELECTRIC OPERATION=

I

$144,0001

MAINTENANCE: MAINTENANCE COST/HOUR· HOURS OF ELECTRIC OPERATION=

[ $10,5001

COGENERATION SAVINGS I YEAR: ---­

---­

1T33:035\

SIMPLE PAYBACK: ========================================= ' ­ 4_.5_YEARS--1

I

LONE STAR GAS - ENERGY COST ANALYSIS

NAME: CITY: CONTACT'

DATE: 26-Jan-93 REPORT PREPARED BY: JIM PHILLIPS, P.E., CEM

ENERGY RATES AND COST DATA I

GAS COST FROM BILL $110,580.61 GAS CONSUMPTION FROM BILL 24605.0 MCF AVERAGE ANNUAL GAS COST $4.49 /MCF

I OTHER DATA I ..1 # UNITS

o

DEG.TEMP. inlet

o

DEG.TEMP. outlet HOT

o

GAUCYC or HR. WATER

o

CYCIDAY

33 % RUN TIME OTHER 24 "ON" TIME (hrs.lday) EQPT.

5 DAYS/WEEK 52 WEEKSIYEAR

I EQUIPMENT DESCRIPTION AND DATA

_I

I EQUIPMENT DESCRIPTION: HOT WATER vs STEAM BOILER

GAS EQUIPMENT DATA . 150 ~P.$TEAMBOILER.

6,000 MBTU/H input 3,3dO MBTU/H output

55 % EFF. HOT WATER BOILER

4,125 MBTU/H input 3,300 MBTU/H output

80 % EFF

ECONOMIC ANALYSI ANNUAL OPERATING COST OF 150 HP STEAM BOILER

HOT WATER BOILER

$55,527.15 $38,174.92 ANNUAL OPERATING COST DIFFERENCE $17,352.23

[

---_

RETURN ON INVESTMENT ANALYSIS I­

...

ESTIMATED COST OF 150 HP STEAM BOILER ESTIMATED COST OF HOT WATER BOILER

$15,000 $0

LONE STAR GAS

J~---C-O-M-PA-N-Y-: -C-O....M-P....A-N·Y...--o;...--...

o:o..---...

.;.;",,;.,;---0-1-/0-7-/9-3--""'·««·"''''''1

CITY: CITY REPORT PREPARED BY:;

CONTACT: CONTACT JIM PHILLIPS, P.E., CEM

i

.~-_ ~

~---_.,.._-""':!!~~~~~--:'l~~~~~:"""'""_...,.

...

---_>-h_~ ~

..

w.{

ENER ;

~

AVERAGE COST OF NATURAL GAS $5.25 ACTUAL ANNUAL or MONTHLY ELECTRIC COST $5.245 from ACTUAL ANNUAL or MONTHLY ELECTRIC CONSUMPTION 76.346 billing

$/KW

EQUIPMENT DESCRIPTION: HOT WATER BOILER o HORSEPOWER (HP) 1 # UNITS 480 VOLTS 65 AMPS 1.73 PHASE (1.73=3PH. 1=1PH) 54KW 184.2 MBTU/H (OUTPUT) 60 DEG.TEMP. (inlet)

140 DEG.TEMP. (outlet) WATER 100 GAUCYC (hr) HEATING

3 Cye/DAY

0 % RUN TIME OTHER

0 ON TIME (hrs.lday) EQUIPT 10d % ELECTRIC EFF. 7 DAYSIWEEK

80 % GAS EFF. 52 WEEKSIYEAR

w~n_.', . , ..._ .. 1.q~?~T.AX_RATSj1·_~

W""N"~~_' LECONOMIC ANALYSI~

ANNUAL OPERATING COST OF ELECTRIC EQUIPMENT $1,585.65 ANNUAL OPERATING COST OF GAS EQUIPMENT $516.96 ANNUAL OPERATING COST DIFFERENCE $1.068.70

RETURN 0 INVESTMENT

ESTIMATED GAS EQUIPMENT COST $2,200 LESS ESTIMATED ELECTRICAL EQUIPMENT VALUE $1.800

NET INVESTMENT $400

SIMPLE 100 % PAY BACK TERM (MONTHS) 4.5 MONTHS

I

i

_ _ _. ~<!3gJURN ON INVE,STME~T (FIRST YEAR) 267.?, PER CENT W6X_~«~<_".=J CALCULATED OPERATING COSTS AND SAVINGS ARE ESTIMATES ONLY. ACTUAL VALUES MAY VARY.

HVAC OPERATING COST ANALYSIS SAMPLE COMMERCIAL BUILDING

DALLAS COOLING &HEATING

26-Jan-93

========================;~===~=====~=.=====~==========================================================================

LONE STAR GAS COMPANY JAMES N. PHILLIPS, P.E., CEM

1133 S. MADISON SALES ENGINEER

DALLAS, TEXAS 75208 (214) 573·4611

======================================================================================================================

SUMMARY

SYSTEMS ...•..•...•....•.•.•.. EXISTING RECIP. ABSORPTION COOLING SYSTEM SIZE (TONS) . 300 300 ANNUAL FULL LOAD HOURS .••... 832 832 ANNUAL TON - HOURS ...•... 249,600 249,600 HEATING SYSTEM SIZE (MBH) . 1,854 1,854 ANNUAL FULL LOAD HOURS .•... 464 464 HVAC OPERATION COST/TON/yR ...•. $194.79 $117.69 HVAC COST/SQ.FT./YR ..•..•... $0.57 $0.34

•••*********** •• *********** ••••********* ••• *********•••••********

ANNUAL HVAC OPERATION COST = $58,436 $35.306

••••****•••*•••••**•••••*•••••••••••••**•••••••••••***•••••*** •••

ANNUAL SAVINGS USING GAS $23,130

••• ***********••*********** •• *********** •• ***********************

======================================================================================================================

THIS REPORT IS AN ESTIMATE OF THE OPERATION COST OF COOLING AND HEATING SYSTEMS. ACTUAL PERFORMANCE DEPENDS UPON WEATHER, EQUIPMENT CONTROLS, AND EQUIPMENT MAINTENANCE. NO WARRANTY, EITHER EXPRESSED OR IMPLIED, IS GIVEN WITH RESPECT TO THIS ANALYSIS. THE PROJECTED COSTS AND SAVINGS SHOWN ARE ESTIMATES AND ACTUAL COSTS MAY VARY.

HVAC OPERATING COST ANALYSIS SAMPLE COMMERCIAL BUILDING

DALLAS COOLING & HEATING

26-Jan-93 ***DATA INPUT PAGE***

===================================~================== ====================================================== ==========

*

BUILDING DATA * UTILITY DATA

~... * ...

SIZE: 103,000 SQ. FT. * GAS COMPANY: LONE STAR GAS

* RATE: DALLAS

COOLING LOAD: 3,605 MBH * IoIINTER or STEP 1: S5.04 per MCF HEATING LOAD: 1,854 MBH * SUMMER or STEP 2: S4.84 per MCF * STEP 3: $4.69 per MCF COOLING HOURS/JLY: 200 F.L.HOURS * AVERAGE GCA: SO.13 per MCF HEATI NG HOURS/JAN: 120 F.L.HOURS *

* ELECTRIC COMPANY: TU ELECTRIC

BASE HOURS/MONTH : 312 HOURS * RATE: GS

BASE POIolER-L1GHTS: 206 Klol * FUEL COST ADJ.: SO.0192 per KIoIH -OTHERS: 0 Klol * PCRF CHARGE: SO.0005 per KIoIH

* CONTRACT KIoI: Klol

BASE GAS LOAD/MTH: 50 MCF *

* IoIATER COMPANY: DALLAS

TAX RATE: 8.25 % * IoIATER RATE: S2.44 per KGAL

============================================================================================================

==========

*

GAS COOLING/HEATING EQUIPMENT DATA * ELECTRIC COOLING/HEATING EQUIPMENT DATA

... _-_ ..._----_ ...-- _* --_ .. __ ... __ ... __ ._-_ ... _---­

TYPE: ABSORPTION * TYPE: EXISTING RECIP.

SIZE: 300 TONS * SIZE: 300 TONS

FUEL CONSUMPTION * POIolER RATING: 1 KIoI/TON

COOLING: 3.60 MCFH * ELECTRIC POIoIER

HEATING: 2.22 MCFH * COOLING: 300 Klol

ELECT. CONTROLS: 7.1 Klol * HEATING: 0 Klol

CONDENSER IoIATER * GAS HEATING: 2.32 MCFH

FLOIoI: 1,260 GPM * CONDENSER IoIATER

* FLOIo/: 900 GPM

AUXILARY POIolER * AUXILARY POIoIER

CONSTANT: 23 Klol * CONSTANT: 23 Klol

CYCLIC: 77 Klol * CYCLIC: 61 Klol

*

MAINTENANCE: SO.OO /TON-HR * MAINTENANCE: SO.OO /TON-HR

======================================================================================================================

D/Flol IoIEATHER DATA COOLING & HEATING PRORATED HOURS:

JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC

COOLING: 0% 0% 7'X 20% 40% 70% 100% 95% 54% 23% 0%