PJM’s Five Coincident Peaks: What You Should Know

With the PJM peak season behind us, utilities are now beginning the annual process of calculating customer Peak Load Contribution (PLC) related costs for the coming year, which may account for 20 to 30 percent of your total electric bill. Typically, the utilities provide the PLCs to suppliers during the spring time.

There are typically two types of components that make up your total electricity price:

1. A consumption-based component, which is based on the KWH usage.
2. The demand-based component, which is the cost of using transmission and distribution to deliver electricity.

One demand-based component to point out is the capacity cost, where the capacity (PLC) is determined using PJM’s five coincident peaks. Every year PJM produces a Load Forecast Report that is a look-back at the summer months to determine these five seasonal peaks.

For a customer with hourly usage, the five coincident peaks are determined by the interval demand coinciding with PJM’s five seasonal peaks. The customer’s maximum demand could be different and may or may not coincide during the five peaks. These five peaks are then used by the utility to determine the customer’s PLC. The average of the five peaks and a combination of zonal and system-specific scaling factors makes up the customer’s peak load obligation.

It is important to note that the five peaks from the previous year are used to determine the capacity obligation for the current year. For instance, the 2015 coincident peaks are used to determine the PLCs for planning year 2016-2017, with the exception to PSEG which is on a calendar year basis.

For a customer with summary usage, the utilities determine the capacity PLC based on the customer’s rate class and profile.

There is a proportional relationship between the capacity PLC and the customer’s capacity costs, where a higher PLC typically results in a higher cost for the customer. Although the most intuitive cost savings come from the reduction of consumption, managing the peaks can have meaningful impact on cost savings since capacity costs can be a substantial portion of the total energy build-up.

Constellation offers energy efficiency programs and a Peak Response program that may help you manage the five coincident peaks in order to minimize capacity costs. Through our exclusive Constellation Peak Response program, customers are notified of predicted peak hours as infrequently as twice per year. The less energy used during the peak hours this year, the lower the costs can be for next year.

For more information on these programs, contact us today.