What Are Block Energy Rates?

In recent years the Lincoln County Power District No. 1 (Lincoln) has witnessed a significant increase in energy consumption by Residential and Small Commercial type customers.  This increase appears due to the installation of large central air conditioning units and electric air source heat pumps.   Although Lincoln does not assess a demand charge on these customer classifications, demand recording meters were placed on several of these accounts to further understand their impact on Lincoln’s system and rate design policy.  From these meters, it is apparent that many of the newer homes being constructed in Lincoln’s service area have peak demands in excess of 20 kW in the winter months.

Lincoln purchases the majority of electric power used in its service area from Hoover Dam.  Lincoln’s Hoover Dam power allocation is a low load factor resource, meaning the generators at the Dam could produce much more energy, if only there was enough water to flow through the turbines.   When there is not enough energy from Hoover, Lincoln must purchase significantly higher priced energy from other sources.  High-energy use homes contribute to the need to purchase this higher priced power.

To encourage energy conservation and to ensure those customers who cause Lincoln to incur higher energy costs pay for those costs, on October 1, 2007 Lincoln adopted new rates that incorporated increasing cost energy block rates for its Residential and Small Commercial customer classifications (i.e. those which do not currently utilize demand charges).   Under block energy rates, customers who use more energy pay more per unit for that energy than do low energy users.  Lincoln’s current block energy rates are as follows: (See below for Chart #1 & Chart #2)

The energy blocks were selected based upon usage patterns of Lincoln’s existing customers.  As Lincoln continues to gain experience with blocked energy rates and begins to accumulate accounting data to allow better allocation of costs to blocks, it is believed the energy rate differential will increase between the rate blocks in future rate designs.