An innovative pricing option for electricity as used by the pulp and paper industry

The pulp and paper industry relies heavily on electricity as an energy source. Although a major share of the pulp and paper industry\´s electrical needs are met by cogeneration, a substantial quantity of utility-generated electricity is purchased. The cost of purchased electricity can have a significant "bottom line" impact on mill production costs. Some utilities now have a new and innovative pricing methodology that provides cost benefits to their pulp and paper customers while also allowing utilities to achieve their own load management goals. This pricing concept is based on a utility\´s marginal cost structure, and is generally known as real time pricing or RTP. This paper provides an explanation of the RTP concept for purchased electricity. It compares and contrasts RTP pricing concepts to more traditional electric rates and describes the potential benefits to the utility\´s load management strategy. An actual pulp and paper mill\´s perspectives with RTP are presented from the standpoint of mill operations and the economic benefit of this innovative rate structure. Many mills will have the option to obtain a lower cost supply of purchased electricity in accordance with their process requirements while using operational capabilities in conjunction with the utilities\´ load management programs. Through the development and use of RTP programs, electric utilities can achieve load management objectives, better use generation resources, and be prepared to compete in an emerging open market place.