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Madison, NJ 07940 (map)
The cost of "peak" energy
Madison pays over $3 million dollars a year in Peak Demand energy costs! And this cost is calculated based on our electric consumption on JUST the five hottest, peak consumption hours from last year.
If we can all voluntarily curtail our electric consumption on JUST the few peak hours this summer, we can save the Borough up to $100,000 or more next year.
How does the calculation work?
All of the electricity that is transported in our region is coordinated by a Regional Transmission Organization called PJM. Originally named in 1956 for the public electric utilities in Pennsylvania, New Jersey and Maryland, PJM manages the high-voltage electric grid and wholesale energy market that now serves 13 states and the District of Columbia.
On the very hottest days of the summer, the power companies bring extra power plants on line to satisfy demand. PJM created a pricing model to attract long term investments in these power plants to insure that there will be reliable electricity for the region on the hottest days of the year.
The power plants dedicated to reliability are paid based on the PJM Reliability Pricing Model and the $3 million charge that Madison pays goes to that program.
The $3 million charge we will pay this year is calculated in part on the amount of energy Madison consumed on the five hottest peak consumption HOURS from last summer. If we can curtail electric consumption on just the hottest hours this year, then Madison will pay lower peak charges for all of next year.
The Actual Calculation
Interested on the ACTUAL calculation? Here it is:
(365 days) x (the RPM rate) x (Madison's Factor)
The RPM rate, is the auction rate established by PJM (ie the per megawatt rate paid to the 'extra' power plants that are reserved and brought on line to satisfy the electric needs on the highest peak days). The RPM rate is set for one year and runs from June 1 - May 31. We can't control this.
365 is the number of days in a year, and we can't control this either.
Madisons Factor: This is calculated by averaging the amount of electricity consumed by Madison on the five hottest hours of the previous year.
REAL CALCULATION FOR June 1, 2009 - May 31, 2010
RPM Rate = 196.5264
Madison Factor = 43.404 megawatts
(365) x (196.5264) x (43.404) = $3,113,461.60, which the Peak Demand Charge paid by Madison for June 2009 to May 2010.
If we can reduce the amount of energy used on the five hottest hours this year by just 3%, we can reduce the peak energy charge for next year by over $80,000.
Remember, we are not asking you to NOT use electricity. We are just asking you to divert your use of electricity from these peak hours.
Please email me if you have questions.
Jim Burnet, Assistant Borough Administrator