Make Lemonade: Why Electricity Rate Hikes Present an Opportunity for School Districts

Earlier this month, the Pennsylvania Public Utility Commission (PUC) alerted consumers that most utilities would be adjusting their prices for electric generation on June 1. While PUC had cautioned a 6% – 45% increase, PPL’s recent announcement of a 21% commercial and 38% residential electricity increase leaves a sour taste for local school districts whose 2022 – 2023 budgets were already approved.

“Inflation and global economic events are impacting all parts of the economy, including the cost of energy supply sources, such as natural gas. Those rising prices are reflected in the new default rate.”

(PPL Electric, The Price of Energy is on the Rise)

Background: How Pricing Works

While PA’s regulated electric utilities deliver electricity, they don’t always generate the electricity. This means that consumers can either shop for an electricity provider or the electric utility company can buy it and pass along the cost at no profit (the default rate).

Each quarter (or biannually), the electric utilities adjust the default service price they charge non-shopping customers for electric generation. This price, known as the “Price to Compare” (PTC), is what consumers use to compare prices and potential savings among competitive electric generation suppliers.

Despite the resulting budget shuffle, there may be an opportunity to make lemonade from all this bad news . . .

Making Lemonade

Higher electricity rates – though problematic for operating budgets – drive greater ROI on energy savings Performance Contract projects. Energy savings Performance Contracts (aka, GESA projects in PA) are projects that enable budget-neutral infrastructure improvements by using future energy savings to pay for those improvements.

Bottom Line:

The higher the cost of energy, the more building improvements can save.

And, this benefit works both ways – for large projects and for small ones:

For large projects, such as converting from fluorescent lighting to LED technology, there is a tremendous ROI, potentially generating paybacks in as little as 5-7 years. With quick returns on improvements like lighting retrofits, those savings help finance other necessary building upgrades.

For smaller efficiency enhancements, such as swapping out pool units or kitchen equipment, these higher electric rates can result in better ROIs, rather than having to be included under the umbrella of larger projects.

Thinking Ahead

There’s no better time to investigate what a GESA project could look like for your school district. A GESA process can take 7 – 20 months, with typical timelines close to 12 months. And, summer is the perfect time to get started, because site assessments won’t disrupt learning. Please reach out for a discussion with our team.