If you pay a monthly bill to Arizona Public Service Co., the odds are you are paying more than you need to.
The electric company recently revealed that less than half its customers are on the most economical plan for their household. Put another way, more than 500,000 people are paying too much for electricity.
The company changed its residential rate plans in 2017 when it also raised rates. Customers who did not select their own plan were moved to one of the five new plans. APS put those customers on the new plan most similar to their old plan, not necessarily their cheapest plan.
The good news is the company is bending its rules and letting customers change rate plans twice a year to help them find the best deal. Normally customers can make only one change a year, meaning they have to stick with a new plan for 12 months.
The bad news: Sorting through the plans is difficult. We’re here to help with that (and we’ll do the same with Salt River Project rates in an upcoming story). To save money, customers may need to learn how some of the more complex plans work.
Did you know that cooking dinner while running the washing machine and air-conditioning at the same time on just one day in the month can trigger a fee higher than $100 on some plans?
Do you know running a pool pump during “on-peak” hours versus “off-peak” hours can cost twice as much?
Each plan has benefits and drawbacks, and certain types of people best suited to use them. Here’s the basics you need to know to pick your best plan.
The plans and their parts
Following are the five plans available. The more complex components of these plans are explained in greater detail below, but this is what you have to choose from:
- Lite Choice: Available to apartments and small homes only. A simple plan with flat, year-round rates.
- Premier Choice: The simplest plan for average-size homes. It has the highest basic service fee, $15, and flat, year-round rates for electricity. New customers must try one of the three, more complex rates before they are allowed to pick this plan.
- Saver Choice: This is a time-of-use plan that charges more for electricity used from 3 to 8 p.m. and with higher rates in the summer than the winter.
- Saver Choice Plus: This is also a time-of-use plan but it charges less for the amount of electricity used than Saver Choice. However, it also adds a demand rate based on the single hour in the month on a weekday between 3 and 8 p.m. when the most energy is used.
- Saver Choice Max: The rates for the amount of energy used are even lower than Saver Choice Plus, but the demand rates are higher.
APS offers a tool for customers online at www.aps.com/compare where the company uses your own energy-usage data from the past year to show what your expenses will be on the various plans. Customers who haven’t already done so must set up an account to use the tool.
Even if you used this tool a year ago to select a new plan, it’s worth revisiting. The tool uses the last 12 months of your energy usage to determine which one will have you paying the least, and your usage may well have changed in the past year, meaning your optimal plan also might have changed.
Some customers may decide that even if they can save a bit on a certain plan, they prefer the simplicity of a more costly option.
Start with the service fee
Every electricity-rate plan charges a basic service fee, but some plans charge more for this than others. This is the amount you owe before you’ve used a single unit of energy.
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Here’s the general idea: APS charges a lower basic service fee on more complicated rate plans that require customers to be mindful about when they use electricity.
Customers who don’t want to manage their bill and simply want to use electricity when it’s needed will usually pay a higher basic service fee.
The highest service fee on APS rate plans is $15 a month and it is on the Premier Choice rate plan. The lowest service fee is $10 a month on the Lite Choice plan for people with low usage.
Kilowatt-hours are like gallons of gas
The next fee on your bill is the energy charges. Residential customers are charged for each kilowatt-hour of electricity they use.
Household appliances use kilowatt-hours of electricity the same way a car uses gallons of gasoline.
Customers can see their kilowatt-hours used by watching their electric meter change. Utilities read the meter once a month, or more, and charge customers for all the kilowatt-hours that they have used.
APS and utilities in general often charge more for a kilowatt-hour of electricity in summer than in winter. That’s because in summer, they have to turn on more power plants to meet demand from air-conditioners, and power also is more expensive on the market when they need to buy it from other utilities.
The simplest rate plans
Congratulations: If you understand so far, you can comprehend the most basic rate plans that APS offers. Both the Premier Choice and Lite Choice rate plans charge customers a basic service charge and energy charge only.
The Lite Choice plan is available only to customers who use less than 600 kilowatt hours a month, which is about half the average customer use. If you are moving into an apartment or small home that historically has used little electricity, this plan is an option.
Premier Choice is available only to customers who use from 600 to 1,000 kilowatt hours per month. APS also won approval to force new customers to try a more complicated rate plan for 90 days before they are allowed to move to this plan.
What time do you wash dishes?
The next type of plan is an Arizona specialty, called a time-of-use rate. These types of plans are used more in Arizona than anywhere else in the country, though they are being introduced elsewhere, including in California.
A time-of-use plan charges less money for electricity used at off-peak hours of the day and more for on-peak hours. At APS, the on-peak hours are 3-8 p.m. weekdays. There are no weekend on-peak hours. Other utilities have different on-peak windows.
These plans reward customers for shifting their big appliances to run on off-peak hours. That’s pretty easy with things like pool pumps, washers, dryers, dishwashers and such, but not so easy in the summer with air-conditioning.
Most customers who are on a time-of-use plan simply limit the time their air-conditioning runs during those hours by turning up the thermostat, though there are those who choose to cool the house as much as possible before 3 p.m. and turn off the AC until 8 p.m.
APS has one plan that uses time-of-use rates without getting more complicated, and it’s called Saver Choice. Customers save $2 a month on their basic service fee by choosing this plan over the basic Premier Choice plan.
But the real saving potential is in the hourly rates. The Saver Choice plan charges 10.8 cents per kilowatt hour during off-peak hours (8 p.m.-3 p.m. the next day). And it charges 23 to 24 cents per kilowatt hour between 3 and 8 p.m., depending on the season.
That means it costs more than twice as much to do things like run the dishwasher on-peak as it does off-peak.
How can you save on a complex plan?
If you want to save money on a time-of-use rate plan, or on one of the more complex demand-rates discussed below, you have to understand where you use most of your energy. And then you have to change when you use that electricity.
APS has used a tagline “shift, stagger, save.” It is meant to explain how customers need to shift their electricity usage to off-peak hours, stagger their major appliances so they don’t all run at once, and save energy overall by being mindful of wasting energy by doing things like leaving lights on when not in the room.
Air-conditioning and heating are by far the biggest energy users in homes, about 51 percent of annual consumption, according to the U.S. Department of Energy.
In summer in Arizona, air-conditioning accounts for about 70 percent of customer bills, according to APS.
Water heating, lighting and refrigeration combined represent about 27 percent of household energy use, according to the Energy Department. Customers in Arizona with natural-gas service for water heaters obviously pay less for this category than those who use electric water heaters.
All the laptops, televisions, washers, dryers, video games and other myriad devices in a home make up only about 21 percent of energy use.
So conserving energy with those electronics can help, but watching television during on-peak hours is not going to break the bank. Neither is charging your phone or running a ceiling fan.
Let’s talk dollars
It’s helpful to look at how using appliances on and off peak affects costs.
Let’s say you use the Saver Choice plan and run an air-conditioner for four hours a day during off-peak hours this July, when it costs 11 cents per kilowatt hour. (Air-conditioners don’t usually run for four hours straight, so let’s say it cycles on and off for a total of four hours throughout the day during off-peak hours).
Of course, your actual usage will include additional cooling on the weekends and probably a mix of on- and off-peak usage. But this example is meant to illustrate how shifting larger appliances like air-conditioners off peak can add up to big savings, at least for those who can make that adaptation.
This July will have 23 weekdays when on-peak hours are in effect. Those 92 hours of off-peak air-conditioning on just those 23 days will cost about $41 on that plan.
Conversely, people who find themselves on such plans and can’t adjust their energy usage will pay a penalty.
If you run the same air-conditioner on the same plan for four hours a day on-peak between 3 and 8 p.m. this July, it will cost you about $88.
Bonus tip: For those people really into managing costs, the APS Saver Choice plan also has a “super off-peak” period from 10 a.m. to 3 p.m., weekdays from November to April when the kilowatt-hour cost drops to 3.2 cents. Using the same example from above, heating the home for four hours a day for 23 days would cost of less than $12.
Demand rates: Only energy ninjas need apply
The next step into the rate-plan labyrinth takes you to demand rates. APS offers two plans with these special fees.
Why would someone willingly choose a plan with an additional fee? Because the cost per kilowatt hour used is substantially lower on these plans, and they can result in an overall lower bill, but only if customers understand how they work and can ensure nobody in the house breaks the rules — even for just one hour each month.
About 60 percent of APS customers are on some form of time-of-use plan, and more than half of those customers could save by moving to a more complicated rate plan, according to the company.
But this is a tough decision point. Many customers opt not to strive for what might be a few dollars a month less because of the risk that they will set a high demand charge and wipe out their savings.
Some customers are “natural savers” because their weekly schedule means they don’t normally use a lot of electricity when it’s most expensive and can therefore take advantage of these plans.
Others are simply mindful of their usage and strive to conserve during peak hours. And unfortunately, still others are unaware or uncertain of how demand fees work even though they pay them.
What the heck is a demand fee?
What’s a demand fee? Pick the single hour on a weekday between 3 and 8 p.m. when your home uses the most electricity, and that hour sets your demand fee. The more electricity used in that one hour, the higher the demand fee.
It’s worth repeating: The single 60-minute period out of the 20-some weekdays in the month is used to calculate your demand fee.
Who knows what their hourly demand is? Basically nobody, because it’s not a common dinner-party topic.
Demand is measured in kilowatts, not kilowatt-hours.
APS meters will tell customers their highest demand. You have to physically go outside and look at the digital display on the meter, which scrolls through readings of the time, date, kilowatt-hours used and “demand register,” which is the highest hourly demand recorded on peak hours that day, according to APS.
The APS website also allows customers to log in and check their hourly demand for the past week, so you can see when that demand point is highest. But without a special meter, you can’t know in real time what your household demand is at the moment.
If you really want to geek out on this, SRP, the neighboring utility, offers an online tool that has the demand for various appliances (www.srpnet.com/prices/home/calculator.aspx). The SRP rates of course are different, but the tool gives you a good idea of how much each appliance can contribute to a demand fee.
The demand fee on the Saver Choice Plus rate plan is $8.40 per kilowatt. For reference, an average air-conditioner draws about four kilowatts of power. If that appliance runs for a full hour, it will set a demand fee of $33.60 for the month.
There’s no way to avoid paying a demand fee on these plans. And remember, even though there is an additional demand fee on the bill, the other components of the bill are lower. The key is limiting energy use so that no single hour sets an excessive fee.
For customers who feel they have mastered the demand-fee puzzle, APS offers the Saver Choice Max plan, with higher demand fees and still lower kilowatt-hour charges.
That plan’s summer demand fees are are $17.45 per kilowatt.
Running an air-conditioner for an hour straight on peak sets a $70 demand fee, before other appliances are factored in.
But that plan also never charges more than 8.7 cents for a kilowatt-hour of electricity, even during the summer peak (compare that with 12.4 cents/kwh on the Premier Choice basic plan and 24 cents/kwh on the Saver Choice time-of-use plan).
That means you can afford to run your air-conditioner moderately from 3 to 8 p.m. so long as you don’t also leave your refrigerator door open, run a a pool pump, bake a cake and vacuum at the same time.
Tell reporter Ryan Randazzo why you use a certain rate plan at email@example.com or 602-444-4331. Follow him on Twitter @UtilityReporter.
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