Nashville Electric Service pursues voltage conservation

Phil Carson | Jun 06, 2011

 

This story is a great example of why "smart grid" means vastly different things to different people. It also illustrates why challenges and solutions for electric utilities tend to be utility- and location-specific.

The Nashville Electric Service (NES) is employing what Vic Hatridge, vice president and CIO, calls a "solution on a shoestring" to deal with changes in how the Tennessee Valley Authority (TVA) charges for its wholesale electricity to municipalities in the Valley. 

TVA has traditionally charged an "energy charge" and a "demand charge" for commercial and industrial (C&I) customers within NES' service territory. That means those customers pay for their electricity use (energy charge) and a demand charge based on their peak use during a 15-minute interval during a given month.

That demand charge, of course, goes to pay back TVA for capital expenditures needed for the capacity to meet those peak electricity demands.  Thus, NES' larger C&I customers have always had demand meters that take a single high-demand reading to gauge their peak electricity consumption.

Starting in April 2011, TVA began to bill NES and its other distributors a demand charge based on the peak usage during a month for all residential customers combined.  This created a problem for NES and all other distributors because they were being charged for peak demand but had no way to equitably recover these costs from residential customers.

Smart meters on every home could provide a means to bill each residential customer for energy charges based on their time-of-use (TOU) demand and/or demand charges reflecting their peak use, but that's too expensive for this municipal, distribution-only utility with about 360,000 customers. (While modest on paper, that profile makes Nashville one of the nation's top dozen municipal utilities, by size.)

Instead, NES will implement a voltage conservation program on a system-wide basis to reduce peak demand and, therefore, mitigate the impact of demand-based wholesale rates on residential customers. The American National Standards Institute (ANSI) standard calls for 114 to 126 volts per residential end-user. During peak load, NES will narrow that range to about 116-120 volts. It will use smart meters as "continuous voltage sensors" at key sample points on every circuit.

In this manner, NES can reduce its cost for peak-time energy use without the need to install a smart meter at every home in its entire service territory. Ultimately, the utility would like to install smart meters on every home to ensure that every customer's voltage stays within the ANSI standard and to achieve the many other benefits that smart meters provide. TVA and NES are cooperatively involved in this solution, which should be fully operational by this time next year.

"Over the past 20 years, our retail rates  have been what they call 'end-use rates,' which means that we paid TVA for wholesale power in the same way we billed for retail power," Hatridge told me. "For example, retail customers paid a flat rate per kilowatt hour, so we reported to TVA how many kilowatt hours we sold to retail customers and paid TVA a flat charge per kilowatt hour for that power. For those large commercial and industrial customers that we billed for a demand charge, we reported that customer's demand to TVA and paid TVA for that demand."

For residential customers, because NES only collected and passed through costs for energy consumed in kilowatt hours, NES received a guaranteed margin.

"What happened to us, as of April 1, is changing the face of the Tennessee Valley," Hatridge said. "TVA is now going back to an old system of charging us demand charges for the energy we sell to residential customers.

"This puts us at risk because we are billing residential customers at a flat rate per kilowatt hour but our wholesale cost for that power will vary. If we happen to have a really hot day near the end of the month, like we did in May 2011, our wholesale power bill from TVA shoots up much more than what we bill to our residential customers. We are concerned about how such an unpredictable profit margin will affect our financial stability."

In effect, NES will use a smart grid technique—in general, distribution optimization, in particular, voltage conservation—to manage retail rates to reflect wholesale rates from TVA.

"We need consistency and predictability of revenue and profit so we can bill our customers equitably for what they use," Hatridge said.

These changes may mean that NES sells less electricity overall, though ideally it would like to maintain the amount it sells, just shifting consumption to off-peak hours.

"On a hot summer day when we're trying to conserve power, we can actually turn down your voltage to, say, 116 volts," Hatridge said. "This won't affect the performance of a customer's electrical equipment, but it will reduce peak load. It will maintain a more consistent margin for NES and it will save the customer money because they will consume slightly less energy. We've prevented a brownout by making a slight adjustment in voltage that's within the acceptable range.

"We think this is a very cost-effective solution," Hatridge concluded. "We can achieve some very significant reductions in peak energy demand at a reasonable cost and without requiring customers to change their energy usage habits."

Join Hatridge and your CIO, customer service and operations executive peers at Knowledge 2011 in Amelia Island, Florida, this Nov. 7-9, when innovative, cost-effective smart grid solutions such as these are explored.

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycental.com
303-228-4757