Hi! Great question, which I’m sure is on a lot of customers’ minds this summer. The simple answer is supply and demand. As temperatures rise during the summer, so does the demand on the electric grid. And with increased demand comes an increase in cost.
Last year, we introduced a new summer rate – a best practice adopted by many energy companies. Instead of a higher flat rate for the summer season, we have a reduced electric rate for 143 hours a week and a slightly higher rate than our previous flat rate for 25 hours a week.
One headline created a lot of confusion, and many shared concerns about this model. While it was a new rate structure, it is actually an improvement from the 2019 summer rate where pricing was higher in the summer than other times of the year, no matter what time of day. With this approach, instead of a blanket higher rate during the summer months, there are only 5 hours a day, 5 days a week when the rate is higher, which correlates with the peak demand hours.
In addition to taking supply and demand into consideration, the new rate structure aligns with our Clean Energy Plan. We all know the cleanest (and cheapest) electricity is that which we don’t use. And we know it is not in anyone’s best interest to build new coal plants – especially when we just need the extra energy for a few days a year. If we can help customers change habits like using appliances in the morning or evening and leveraging smart devices, it will ultimately save customers energy and money. That is why we changed rate models.
It’s also important to note, while we generate electricity, it goes into a regional market with 184 energy companies contributing to overall capacity. The new rate covers the higher cost to buy energy during these peak demand windows. Which means we don’t see income gains from the rate change. Instead, it gives customers more control over their energy bill and contributes to a clean energy future we can all enjoy for centuries to come. In fact, customers can pay less on their bills if they are reducing their electricity use during the on-peak times compared to 2019 rates.
While energy bills can be affected by other factors like weather and home efficiency, we’re doing what we can to help customers manage all aspects of their energy use and keep prices affordable long-term.
As a reminder, peak times occur June 1 – Sept. 30 during weekdays from 2 to 7 p.m. By shifting your use to mornings, nights and weekends you will take advantage of the lower-cost energy. And it’s important to note also, if you don’t shift your use at all – most bills won’t see more than a $2 a month difference.
Check out this blog for additional information: https://force4michigan.com/summer-peak-rate-encourages-customers-to-shift-energy-use-to-off-peak-times-for-cheaper-rate/