Help your budget and the environment at the same time

"On Demand" Energy Savings

by Gary Foreman

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I was wondering about a program offered through my local electric company. They offer savings of $5-10 off your monthly bill for allowing them to "cycle" your energy resources. I am not at all familiar with this, and before I signed up, I thought I should learn something about this program.

Heather has discovered one of the more popular energy saving programs in the country. Not only do consumers like the savings, but the program also reduces costs for the electric company. So it's a classic win/win situation.

How do the programs work? Actually they're pretty simple. Florida Power & Light (FPL) calls their program "On Call®." Their program focuses on A/C, central electric heat, the water heater and pool pumps.

FPL adds a small control box to the homeowner's appliance that can be run from a central location. The box allows them to shut off the power to that appliance for short periods of time during peak usage. They claim that the homeowner is unlikely to notice when it is being used since the time is relatively short.

FPL customers have two choices. One is for a 15-minute shutdown. The other is for a four-hour shutoff. The consumer selects how many of the four appliances that they want included in the program.

For instance, if you have your A/C on the 15-minute program, your bill is reduced $21 per year. The four-hour program will pay you $63 for your A/C. With FPL's program, you can save up to $137 per year if you allow them to control all four appliances in the four-hour program.

Why do the electric companies offer these programs? They're in a tough position. We expect them to supply power whenever we request it without fail. That includes the hottest day of the summer when everyone's air conditioner is running continually.

But the capacity that's needed for peak demand isn't needed most of the time. So, if the electric company can reduce peak demand, they won't need as much capacity. That could eliminate the need to build new power plants, which translates into avoiding a major expense for the utility company. FPL claims that their program has eliminated the need to build two additional generating plants.

Related: Will New Energy Efficient Appliances Save Me Money?

Consumers generally like these demand response or load management programs. The electric company pays for the installation. Usually the inconvenience is minor, and the savings help reduce a bill that has had a tendency to increase.

In the future, we'll see even more of this type of demand management. It's difficult for utilities to get the approval and financing to build new power plants. So they have a big incentive to reduce peak demand.

Some utilities are beginning to offer variable pricing. The consumer pays more for electricity during peak usage times and pays less for off-peak hours. So far, most of these programs are aimed at large industrial users of electricity, but they're beginning to reach the consumer market.

Technology is allowing the utility companies to go beyond the old tools. The demand management boxes are currently controlled by a radio signal, but future technology will allow for computer control of major appliances. That will mean that consumers will be able to turn an appliance on or off using their cell phone or computer. And the number of appliances that can be controlled will continue to increase. New appliances may be designed with the controlling device built-in.

So not only is it a good idea for Heather to sign up for the "cycling" program, but she should also see what other energy-saving programs are available through her electric company. Some utilities will pay the cost of a duct inspection and will contribute to any repairs needed. Others offer rebates if you update old inefficient appliances or add insulation to your home. The savings could be significant.

Heather has found one of those situations where she can help her budget and the environment at the same time. Plus, she'll be reducing the amount of energy she consumes. Pretty much a good deal all around!

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.

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