On December 16th, Merrimac Light Department (MMLD) made an important investment in in a continuing effort to reduce your future electricity bills. The MMLD light commission reviewed and approved the purchase of a 1.4 MW gas-fired generator from Duke Energy Corporation. The generator is located at our electric substation. This purchase is part of our efforts to reduce or peak shave our transmission costs, a move that will bring long-term savings to our customers.
What is Peak Shaving?
You may be wondering, “What exactly is peak shaving, and how does it lower my electric bill?”
Peak shaving refers to reducing the maximum amount of power we use during the highest demand periods. When our demand for electricity peaks or is high (during hot summer days or cold winter nights, typically in the evening hours), it can drive up the cost of transmission, which is the expense of transporting electricity from various sources of power supply located throughout New England and bordering regions to our local substations. Transmission costs are one of the largest portions of our electricity bills.
Transmission costs are determined by the ISO New England (Independent System Operator of New England), the entity that manages and maintains the regional electricity grid. MMLD, like all utilities, is responsible for paying these transmission costs based on our highest demand period of each month.
How Will the New Generator Help?
Transmission costs are calculated based on the highest amount of power we use each month. For example, if our peak demand is 3 MW on a single day, then we pay for 3 MW of transmission capacity for the entire month—regardless of whether we use that much power again or not during the remaining portion of the month. This is where peak shaving comes in. By using our new gas-fired generator to reduce the peak demand during those high-usage periods, we can lower the amount of transmission capacity we need to purchase. Even a small reduction in peak demand can significantly reduce our monthly transmission costs. The generation unit will not run continuously. It will only run on natural gas for very short periods of time during each monthly peak day period. During these high demand periods you can help as well by shifting your electricity usage from the evening hours to other parts of the day.
Why Does This Matter?
Transmission costs are a major component of our electricity expenses and are one of the fastest-growing costs in the industry. In fact, transmission costs are expected to increase by 33.3% in the coming years.
With this new generator in place, we can shave off the peak demand and avoid paying for the higher transmission costs associated with those peak usage periods. By doing this, MMLD will be better able to manage these l costs down and keep our costs to keep to you, our customers, as low and competitive as possible.
A Long-Term Investment
Our goal at MMLD is to pay off the investment in the 1.4 MW gas-fired generator in approximately three years. Once the generator is paid off, the ongoing savings from peak shaving will further help ensure that our electric rates remain low—something we’ve worked hard to maintain over the years.
This is just one of many steps that the light commission, our office staff and our operations crew are continually seeking to implement to ensure that we continue to provide you with affordable, reliable electricity. We’re committed to making smart investments today to keep your future electricity bills as low as possible.