11 Factors Affecting Electricity Costs and How an Electricity Audit Helps

Different factors impact business expenses and electricity cost is one of the most prominent ones among them. While calculating overall energy expenses, electricity bills make up quite a considerable part of businesses. In the Stated Policies Scenario, demand for global electricity is set to grow at a rate of 2.1% every year till 2040 and electricity’s share in total energy consumption will increase to 24% by 2040 as well.

Hence, electricity bills stand as one of the biggest utility costs for any business, making it an area of grave concern. Various factors come into play for increased electrical prices, thus increasing overall utility bills. This is exactly where electrical audits come into the picture. Business owners must look at it to include measures for reducing the costs as much as possible.

What is causing the rise in energy prices?

Why are energy prices so high? Why have electricity prices gone up? These are some of the most common questions many of us ask often. Let us answer the questions and discuss the reasons for the same.

Here are the 11 most common factors which are the probable cause of rising energy prices:

1. Kind of customers

When compared to industrial customers, commercial, and residential customers pay higher electricity bills. This is because the cost of electricity distribution is more for residential and commercial customers. Industrial customers use electricity a single time at high voltage and they do not need to step down. Wholesale electricity rates are applicable for industrial customers and hence they are cheaper.

2. Expenses of transmission and distribution

There are systems in place for transmitting and distributing electricity to customers. Along with the infrastructure construction, there is also a need for maintenance and continuous operations for an uninterrupted power supply. These contribute to electricity costs as well.

3. The season

Did you know that seasons impact the cost of electricity directly too? Electricity bills tend to be highest during the summer months as people use fans and air conditioners to beat the heat. Electricity demands are high during the summer months, which causes more resource consumption and increased overall costs.

4. Power plant costs

Without constructing power plants, electricity cannot be produced and distributed throughout the different corners of the country. The expenses for building, operating, and maintaining the power plants are also included in the electricity bills for customers. If the power plants are located at a far-off distance from a locality, the transmission and distribution charges become much higher.

5. Local regulations

This is an important factor impacting electricity costs in an area. Local regulations might be responsible for higher or lower electricity costs. The end-consumer electricity costs depend on the regulated and unregulated prices of the state along with the service and utility commissions.

6. Weather conditions

Weather conditions impact electricity expenses directly. In harsh weather conditions, people will need more electrical power. Again, in conditions like snow and mild rain, there will be efficient hydropower generation, reducing electricity production and costs.

7. Fuel costs

There is a need for fuels for electricity generation and distribution. Fuel costs vary from one place to another and also on the kind of fuel that is being used for energy generation. Using non-renewable sources of energy such as coal is expensive when compared to using renewable sources of energy such as hydro power or solar power.

8. Location

There are many factors which are unique to a location and these might impact electricity costs. Some of these factors include the likes of seasonal weather conditions, regulations, power plant costs, fuel expenses, distribution costs, etc.

9. Minimum usage charges

There is a certain minimum usage level of electricity that almost all suppliers have. This implies that the suppliers will charge the customers a minimum amount regardless of energy usage. This impacts the total electricity bill that one needs to pay.

10. Renewable energy

In many deregulated states, sustainable energy solutions are popular with local consumers and suppliers alike. Renewable energy, therefore, impacts electricity pricing because the cost is dependent on the source of the energy. There is also better tracking of the amount of energy available and the amount that is consumed.

11. Competition

Customers face a direct impact on electrical costs in areas with deregulated markets with more than one energy supplier. The prices are more varied and the costs are lower when the market is highly competitive with multiple energy sources and suppliers.

How do electrical audits help in managing electricity costs?

We have already discussed some factors which are the probable cause of rising energy prices. Along with managing these factors, there is another thing which might help in managing electricity expenses – electrical audits.

Now that you know and understand how electricity costs are impacted by several different factors, let us tell you about how electrical audits can help you manage your energy utility bills.

An electricity audit helps in determining any opportunities or finding discrepancies for getting refunds on the electric bills. Along with this, an electrical audit also provides a detailed evaluation of the overall electrical usage in a business. With the evaluation, you will find ways of reducing electrical expenses without hampering the operations of your business.

Here are some of the other most important benefits of an electrical audit:

• Exhibits sustainability to customers and competitors

Valuing sustainable solutions is a positive sign for any business. An electrical audit along with other energy audits represents that you value sustainable solutions. This makes an impression on your customers and helps you stand out from your competitors. Implementing energy-efficient solutions not only makes your staff happy but is also eco-friendly. You will draw more customers by exhibiting sustainability and environment-friendly efforts.

• Helps in identifying issues with billing and equipment

In an electrical audit, you can identify potential issues and problems with your equipment, which are impacting your electrical system and charges negatively. Your faulty equipment might be using increased electricity, thereby increasing your energy costs as a result.

We also often ignore certain areas which might cause electrical accidents. For instance, there might be exposed wiring which might cause electrical fires or short circuits. These safety hazards are uncovered in an electrical audit as well.

There are some issues which lead to electricity wastage resulting in higher costs. Some of them are:

• Outdated electrical equipment and appliances
• Inefficient lighting and electrical systems
• Keeping equipment on for a long time even when not in use
• Poor weatherization and insulation of doors and windows

Billing errors are not uncommon in contributing to higher electrical bills. During an electrical audit, these errors get identified and addressed too. You can lodge complaints and obtain refunds on such faulty electricity bills.

• Helps in maximizing equipment longevity

Working with old and outdated equipment will raise electricity consumption bills. During an electrical audit, you will be asked to replace the equipment. With new and more energy-efficient electrical equipment, you will have higher operational efficiency and longevity of the equipment. High-performing equipment is lesser prone to breakdowns, accidents, and wear and tear. Therefore, such equipment proves to be more cost-effective.

• Helps in getting recommendations for energy-efficient solutions

Electrical audits help professionals in understanding and determining the various ways for increasing overall business system efficiency. Many businesses do not know ways of reducing energy consumption and overall costs without hampering business operations. Your business might be using outdated lighting systems, thus increasing energy consumption and leading to increased electricity bills. Check your insulation and HVAC system as these are the leading causes of wasted electricity. You can save a substantial amount of money by stopping electricity wastage.

• Helps in creating a comfortable work ambience

Did you know that you can develop a comfortable workplace ambience by uncovering the inefficiencies, which are adding to increased electricity bills? For instance, in the electrical audit, it is found that your HVAC system is consuming more energy because of insufficient insulation. Working on the insulation helps in the effective functioning of the HVAC system, thus keeping electrical bills within permissible limits. Once the workspace becomes comfortable, employees become more productive, leading to increased efficiency and higher revenue generation.

• Helps in increasing property valuation

Installing and implementing efficient equipment and appliances for your home or business increases the overall property valuation. Updated and modern lighting systems, HVAC systems, and electrical equipment, not only make living and working easier and more comfortable but help in saving on electricity bills as well.

If you are looking to control electricity expenses and maintain efficiency at the same time, getting routine electrical audits is the best practice you must follow.

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