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How demand affects the cost of electricity

Those dreaming of a white Christmas got their wish a few weeks ago. But when accompanied by bitter cold and high winds, it may not have been much like the ones they used to know. I want to thank Tipmont Wintek team members who worked to restore holiday-weekend outages as safely and quickly as possible, as well as our members for their patience during those efforts.

Such extreme cold also greatly influences what Tipmont pays for the wholesale energy we distribute to your homes, farms and businesses. In addition to a monthly purchase of kilowatt-hours (forecast in advance based on capacity patterns), Tipmont also pays a monthly demand charge. This charge is determined by when the electricity demand peaks each month and generation from our power supplier, Wabash Valley Power Alliance, must meet that demand. This typically happens between 6 p.m. and 8 p.m.

Imagine one door to enter a building that 30 people are trying to use all at once. Electricity demand spikes work the same way, as most Tipmont members tend to do the same things at the same times.

You already use more energy over the holidays, as you are home more often or perhaps hosting more people than usual. Throw in extreme cold, and energy demand significantly increases because heating typically uses the most energy in your home. In turn, this can require more power than previously forecast and require Wabash Valley to purchase more at higher current market prices, which the demand charge addresses.

The same holds true for times of extreme heat. Demand spikes are deeply tied to weather because heating and cooling are your home’s largest energy users. This means demand charges are often lowest in March, April or October and generally hit peaks in January, July and August. Our Usage Explorer tool in SmartHub overlays temperature data with your energy usage, allowing you to see how weather affects your own use.

Even during those peak months, simple adjustments to lower consumption between 6 p.m. and 8 p.m. can reduce demand and save you money without sacrificing comfort. Turn your thermostat down a degree or two (or up in summer). Delay washing dishes and clothes. Wait to take a hot shower.

Want a clear picture of how you use energy? Consider real-time home energy monitoring with a Sense device. Learn more about this device, and our available rebates, at tipmont.org/sense.

Picture of Ron Holcomb

Ron Holcomb

Ron is a 30-year veteran of the electric utility industry with extensive experience in power supply, advanced grid technologies, essential service operations, economic development and value-driven growth initiatives for combined electric and telecommunication utilities. During his career, he has led three utilities as President/CEO and provided management consulting to utilities across the country. Ron joined Tipmont as CEO in summer 2013. He holds a B.S. in Physics from Austin Peay State University and an MBA from Murray State University.

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July 19, 2024
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