Freedom Electric Water Heaters

White Paper - Downloadable PDF (671KB)

The Value of Electric Water Heaters to Cooperatives
A White Paper
Larry W. Shober

After the power lines are built the system is being paid for from the revenue received from the electricity sold over them. It stand to reason then, the more kwh you sell the less you have to charge for each one to cover costs. So to keep rates down, it makes sense to build load.

Most cooperatives serve rural areas where commercial loads are scarce. But every cooperative has a residential load. This is the basic load, common to all our systems. We should examine closely the load building possibilities that exist here.

The load I want to zero in on for this paper is the water heater. It is one of the biggest users of energy in most homes. Every house has one, but all of them are not electric water heaters. If the saturation of electric water heaters on your system is less than 90% you have a great building opportunity.

I believe it is the goal of every electric cooperative to give the best possible service at the lowest possible price. To have the lowest possible rate means we must be innovative in ways to build load that may be unique to our particular system. But it also means we can't overlook the basic possibilities that exist in all rural electric cooperative systems.

The water heating load is so important that i don't believe any part of promoting it should be left up to an outside source. It's tempting to just offer a rebate and not get anymore involved that that. But this attempt to have a "no hassle" program will probably only get mediocre results. If you really want to make a difference, sell water heaters.

If there are 6,000 residential members and you can increase electric water heaters only 8% that adds 480 electric water heaters to your load. At a $122.40 margin that's $58,752. What if the increase was 1616^ or 960 water heaters? Now the margin is $117,504. You can see the potential here - it's huge!

Find a reliable supplier and go to work. When the rural electric cooperative controls the program, you can give the kind of service to your members that rural electric cooperatives are noted for. Nobody can do it better and the benefits are many.

You need to sell a good water heater but there is no point in handling the most expensive water heater out there. Remember, your goal is to build load, which helps every member you serve by keeping rates down.

Here are some trited and proven ways to increase the saturation of electric water heaters: Sell them at cost. In order to replace a unit that is not electric, give it away along with $100 to help with the installation cost. Just be sure you get the old water heater turned in to the rural electric cooperative. Or better yet, have cooperative employees install it. Then maintain it at no charge.

It may sound crazy to give a water heater away to replace a non-electric water heater bur run the numbers. Here is an example of why you can afford to give it away. 50 gallon water heaters with a lifetime warranty range from $426 to $559. The rural electric cooperative paid $476.00 for a 50 gallon lifetime warranty heater. If it uses only 300 kwh a month it will use 3,600 a year. If the margin of what the rural electric cooperative pays for a kwh and what it sells a kwh for is $.034, the water heater shows a margin of $122.40 a year. That means the water heater pays for itself in 3.9 years and for the next 10 years you have $1,224 in margins. But you don't have to give them away, sell them at cost or some fraction of cost.

Keep a steady stream of advertising out there in your newsletter or bill stuffer so when members need a water heater they know exactly where to come.

The Benefits

• Margins that help keep rates down.
• Load management possibilities with timers or a load management system. This is a great opportunity to increase margins even more.
• Total control of program. Don't need to worry about others bungling.
• In most cases members will save money by using an electric water heater.
• Members who appreciate what the rural electric cooperative is doing for them.
• Opportunity for face to face contact with members. This is important

One of the objections that rural electric cooperatives have to selling water heaters is they don't want to upset the local stores taht sell them. My argument is your first concern should be to all your members. Stores sell water heaters. They don't care if it's propane, gas, oil or electric but the only one that benefits your members is the electric one. If you saturation is less than 90% they obviously haven't been pushing electric water heaters.

This is not a complicated program. Help keep those rates down. Find a supplier who will work with you and do something good for your members.