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The first step in reducing energy costs on the farm is understanding your rate schedule.

Curt Arens, Editor, Nebraska Farmer

February 26, 2024

6 Min Read
Power lines in field
REDUCING OVERHEAD: While saving energy costs with simple seasonal rate schedules requires reducing the amount of energy used, other TOU schedules, the demand factor and power factor offer more opportunities for savings — if you understand how to use them to your advantage. Curt Arens

At a Glance

  • Download your rate schedule to understand how you can adjust your operations to save money in the long run.
  • Depending on your rate schedule, moving the time frame of some operations and load may reduce your energy bill.
  • Understanding the power factor and taking steps to add a capacitor to large motors can save you money.

The way Nebraskans, including farmers and ranchers, are being charged for their electrical energy is changing.

As the only completely public power state in the nation, all utilities are publicly owned or cooperatives, by state statute, with no investor-owned utilities.

As energy demands and peak load times change, the way farms are charged for power by their local utility is also being adjusted. F. John Hay, Nebraska Extension educator, talked about these changing energy bills during a recent University of Nebraska Center for Agricultural Profitability webinar.

“Part of the changes are a natural movement in the system, but we also know that modern digital electric meters don’t just count kilowatt-hours,” he said. “They can do more. With an advanced meter infrastructure, they are like their own little computers. They can record the time of day for peak kilowatt-hour use or demand, a power factor and load impact on power quality.”

In the case of renewable power generation on the farm, the meters can measure electricity going out and coming in and report back to the utility. This has led to a more detailed rate schedule, and charges for different pieces. But this kind of information and new rate schedules can also lead to more opportunities for savings on electric bills.

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“How we are being charged for electricity,” Hay said, “that will dictate how we can get savings in the end, combining the rate schedule with how we are using it.”

He added, “It’s a matter of trying to understand and match those two items so we can make management changes, and we can have the best impact possible.”

Common charges

Hay talked about common charges from a local utility that may or may not be reflected on monthly billing statements but are still a part of the overall fee structure. Here are a few examples:

Customer charge. This is a fee that covers a portion of the infrastructure costs associated with power generation. As a fixed charge to be connected to the power grid, it often ranges between $5 to $50 per month for farms or rural residents, Hay said.

Energy charge. This fee covers energy consumed in kilowatt-hours. The rate is different between utilities because they adjust for providing energy when consumers need it. There is often a “power factor” adjustment to account for efficiency.

Transmission or distribution charge. This covers the costs of the local utility to get electricity to your farm or home. It might be a part of the bill, but often it is not listed there. Sometimes this is covered through the customer charge or the energy charge.

Variety of other small charges. These might include other taxes, riders or fees, depending on the local utility.

From the electric bill, customers can surmise basic information on how much electricity is used during their billing period, the customer charge, kWh used and additional charges, Hay said.

“Don’t rely on your bill to know how you are charged,” he said. “Call and ask for a rate schedule, or you can often find it online. You may be charged differently depending on the time of year.”

By downloading the rate schedule, as Hay suggested, customers get more details to understand how they are being charged, so they can plan for savings in the future.

Scenarios and savings

“Electric rate schedules are changing,” Hay said. “Some common changes are increasing customer charges and reducing energy charges; addition of demand charges; charging different amounts at times of peak use; and adding a power factor correction.”

He discussed a few examples of different types of rate schedules and how to save money on the farm with adjustments:

Simple seasonal rate schedule. With a simple seasonal rate schedule, which is most common in Nebraska, rates per kWh are higher in the summer than in the winter, with added customer charges.

“If that is your rate schedule, the only avenue to garner savings is to use less energy,” Hay said. “It doesn’t matter when the peak load is because you are only charged by kWh. The only recourse is energy efficiency, that is turning things off. It doesn’t allow for many opportunities in savings as other rate schedules. Look at appliances and motors, heating and cooling and make a plan for energy efficiency over time.”

Time of use rate schedule. There are customers in Nebraska that have specific rates, for instance, that are higher at times of peak load, such as in the afternoon, or lower rates for times of lesser load, like nighttime. It depends on the “time of use,” or TOU.

“We shouldn’t be too scared of TOU rates, because they really don’t penalize us,” Hay said. “But what it does is allow for an opportunity to move things off that time. Our opportunity is not just in saving kWh. Now we can use quite a bit of energy, but we must move operations off these higher-rate times.”

If you normally start chores at 6 p.m. and turn everything on, maybe delay it a little later and pay considerably less, Hay suggested. Program timers to turn things off at certain times. Use programmable thermostats or get something cooled down or warmed up ahead of time, float through those peak rate times and shift the load times to get these savings, he said.

Demand. Also affecting overall energy bills are items such as demand, which measures the maximum amount of power a customer draws at one time during a set time period. Customers will need to find out the time frame and date of when their peak demand was set, and then decide what was operating at that time, Hay said.

Using a dairy example, if a demand factor was set at 10 a.m. on a July day, there were probably ventilation fans, manure pumps, coolers and much more operating during that time. But if one of those operations that was not crucial, like the manure pump, and could be set to run during the night, it would significantly reduce the rate charged to that dairy for the year.

Power factor. This is a more complex term to describe how efficiently your electrical systems are running. Hay said this is an easier aspect to remedy. Simply add power factor correction capacitors for larger motors or electric panels connected to larger motors, which can provide some reactive power to the system.

Many farmers, including irrigators, are already using capacitors, Hay said, but they have to make sure they are working and maintain that system. “These devices might cost between $200 and $500, but they will pay for themselves very quickly,” he said.

There are many ways to reduce electrical bills on the farm, Hay said, but downloading and understanding the rate schedule and asking your local utility about how your bill is derived is the first important step to making a plan for saving.

Learn more by emailing Hay at [email protected].

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About the Author(s)

Curt Arens

Editor, Nebraska Farmer

Curt Arens began writing about Nebraska’s farm families when he was in high school. Before joining Farm Progress as a field editor in April 2010, he had worked as a freelance farm writer for 27 years, first for newspapers and then for farm magazines, including Nebraska Farmer.

His real full-time career, however, during that same period was farming his family’s fourth generation land in northeast Nebraska. He also operated his Christmas tree farm and grew black oil sunflowers for wild birdseed. Curt continues to raise corn, soybeans and alfalfa and runs a cow-calf herd.

Curt and his wife Donna have four children, Lauren, Taylor, Zachary and Benjamin. They are active in their church and St. Rose School in Crofton, where Donna teaches and their children attend classes.

Previously, the 1986 University of Nebraska animal science graduate wrote a weekly rural life column, developed a farm radio program and wrote books about farm direct marketing and farmers markets. He received media honors from the Nebraska Forest Service, Center for Rural Affairs and Northeast Nebraska Experimental Farm Association.

He wrote about the spiritual side of farming in his 2008 book, “Down to Earth: Celebrating a Blessed Life on the Land,” garnering a Catholic Press Association award.

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