Know Your Options for Purchasing Electricity

12/15/2012 7:00 AM

There have been numerous changes in price structures for electricity since deregulation of electricity generation was completed in Pennsylvania on Dec. 31, 2010. One of the most significant changes is that you can now choose the company that is responsible for the generation and transmission of your electricity. However, you are still obligated to your local utility company for the distribution of the electricity. This deregulation of electricity generation applies throughout Pennsylvania, except for those areas served by the rural electric cooperatives.

Whether you have selected a supplier or opted to remain with your local utility company for the generation and transmission of your electricity, be sure to inquire about the different rate tariffs — or schedules — that influence the amount you pay for electricity. Your local utility company and your supplier probably do not know which rate schedule would be most advantageous for your dairy operation. It’s necessary for you to do some homework to first learn what the options are. Then figure out if any of the options makes sense for your dairy.

Consider the case of a large dairy farmer in Wisconsin. He was able to lower his monthly electricity bill by about $1,000 by switching his milking times so that one of the milkings takes place during the off-peak period as specified in the tariff of his local utility company. He did not decrease his consumption of electricity by making this change, and he did not need to make a capital investment (other than some management time to accommodate the change in milking times) to realize this substantial monthly savings.

Common electricity pricing options in Pennsylvania today are:

On-peak and off-peak rates

Real-time pricing (RTP) hourly rates

Projected day-ahead hourly rates

Night and weekend rates

Curtailment rates

Interruptible rates

If your dairy is on a commercial or industrial rate tariff, you have more options. Also, generally speaking, you will have more options if you have a large on-site electricity generation system so that you can occasionally go off-grid when requested by the utility company.

To learn your tariff options from your local utility company, you can go to the website;

Editor’s note: Dennis Buffington is a Penn State professor emeritus.

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