AWWA ACE63200

As a rule, electricity consumption is the second highest cost for water distribution companies behind labor. The price of electricity is also rising at a far higher rate than labor costs making it likely that it will become the dominant cost in production and distribution of water in the near future if it is not already at that position now. The nature of the electricity market is changing dramatically in most states under the guidance of the Federal Energy Regulatory Commission (FERC) with the intent to deregulate the energy market, and possibly the transmission and distribution markets as well. A working understanding of concepts such as Locational Marginal Prices and both Real-Time and Day Ahead Pricing are going to be very important both to the procurement team at water utilities to best manage the purchasing process and to the operations and planning teams to leverage the market when scheduling pumping. A prime requisite is educating the respective personnel responsible for procurement and operations to understand the electricity industry reference framework and jargon for how electricity is priced and the options available in a consistent way so fair "apples with apples" comparisons can be made between competing offers of supply. This paper is a primer on the terminology in use and options generally available throughout the U.S. with particular relevance to water distribution systems. The authors also present some methods for reducing risk in the energy purchasing process by optimizing the energy load-profile to match financial incentives set by the energy companies. Includes reference, figures.