Cut your demand and pay less for power
By Jennie L. Phipps • Bankrate.com

Let's face it, you can only shave so much off your electric bill by turning off the lights and insulating the front door.

Demand pricing might be the answer to your electric-budget angst. Under these programs, utility companies offer special deals to customers willing to cut back their usage during peak hours. If your electric provider offers demand pricing and you successfully manage your usage under the plan, you could save a bundle.

How does demand pricing work? There are a variety of permutations, but basically a utility company charges a higher rate during periods when the demand for electricity is greatest, for instance, on summer days when everyone is running air conditioners. The theory is that the utility must build enough power plants to accommodate this maximum demand even though most of the time its customers will be using far less. Customers pay for this additional capacity.

Sometimes under demand pricing, the utility charges a higher rate per kilowatt hour when you use power during the peak periods. Other times, you'll face an additional fee above and beyond your energy usage based on the highest number of kilowatt hours you use in the course of a month, a week or even a day. Some utilities rely on a combination of these rate plans. Demand pricing generally is an option for consumers who are willing to be inconvenienced.

Dominion Virginia Power serves 2.2 million electric customers in the eastern part of the state and charges most of its residential customers .079 cents per kilowatt hour when they use less than 800 kilowatts of power per month; they pay .089 cents per kilowatt hour when their usage climbs above that. A Dominion customer using 1,000 kilowatts per month on this standard rate plan would pay $81. Then there is a demand charge -- which could be substantial -- added to the total, a flat fee calculated on the highest amount of electricity a customer uses during peak times.

But Dominion also offers an alternative demand rate payment plan for those who are willing to pay attention to the times during which they use power. It's reminiscent of long-distance phone plans where you get lower rates for making calls at specific times of the day.

For utility customers who choose Dominion's time-of-use plan, the utility charges .03 cents per kilowatt hour off peak and a whopping .16 cents per kilowatt hour for on-peak usage. Peak hours during the summer air conditioning season are 11 a.m. to 10 p.m. Monday through Friday. Weekends are off peak. Peak hours during the winter are slightly different. You'll face a demand charge under this plan, too, but it presumably will be lower because you're making an effort to use less on-peak power.

It's difficult to determine just how much an average electric consumer might save with demand pricing because of all the variables. Only a fraction of Dominion's customers, around 10,000, opt for this plan because as Irene Cimino, a company spokeswoman says, "It has to fit into your lifestyle."

Monitoring pays off
However, there are ways to beat the utility at its own game. Jack Greenhalgh of Virginia Beach, Va., thinks he's done that and that you can do it too by both paying attention and installing an electronic monitor.

Greenhalgh, who is a member of the consumer advisory board on energy deregulation in Virginia and a potential reseller of electricity when deregulation makes that feasible, has three heat pumps and two hot water heaters in his 3,000-square-foot house. When all of them are running simultaneously, his house pulls nearly 40 kilowatt hours of power, enough that if he paid full price on the standard rate plan, his bill would be more than $200 per month.