A decade ago, a couple named Smith, new to Cook County, decided to build a new house. They consulted with their contractor, electrical subcontractor and Arrowhead Electric Cooperative on the best approach to energy conservation. They insulated heavily and purchased energy savings doors and windows. They also invested in a more expensive water heater designed to work with off-peak electricity. The heater would switch on at night, during times of low energy demand, store the heat and serve it up during the day. It would be controlled by a radio transmitter under one of the “silver” programs offered by Arrowhead’s supplier, Great River Energy.

The house was completed in good time, and the couple moved in. They frequently pinched themselves at their good fortune to live in this beautiful new house in this gorgeous corner of Minnesota. And they were pleased that they’d invested in the off-peak water heater; the savings would pay quickly for the additional investment. Everything was good for the Smiths.

But everything was not good for Great River Energy, according to Arrowhead Electric. The silver programs, Arrowhead said, ended up losing money and failed to appreciably reduce peak energy demand. The biggest problem was that the off-peak appliances were not on separate meters, so Arrowhead and Great River could not track actual off-peak electric energy usage. Instead, they estimated off-peak as a proportion of total energy used. That worked pretty well if the meter served a single house. It worked much less well if people added an electric sauna and a garage with a loft apartment, all on the same meter. Inevitably, Great River ended up giving its silver-program customers a reduced rate for significant amounts of electricity it had to buy at on-peak prices.

So Great River discontinued its silver programs, which left many customers of Arrowhead Electric who had invested in the programs feeling they’d been treated unfairly. Arrowhead sympathized, and so it gave the former silver-program customers a rate break, only gradually bringing them up to the full “general service” rate. They’ve now reached that rate and currently pay 11.3 cents per kilowatt hour for all their electricity. In January, the Smiths found their electricity bill from Arrowhead topped $600, an amount they cannot afford to sustain.

Fortunately, there is another way forward, for Arrowhead customers wishing to save on their electrical bills. Arrowhead has long offered significant rate breaks for both off-peak and interruptible/dual fuel heating systems. Electric rates occasionally change, but in 2010, Arrowhead’s “general service” rate was 10 cents per kilowatt hour, while the off-peak rate was 4.5 cents, and the interruptible/dual fuel rate was 5.6 cents. The key difference between these rates, offered as part of Arrowhead’s “EnergyWise” program, and the old silver programs is that separate meters are required, which might entail significant rewiring and the possible installation of separate breaker panels. Both off-peak and interruptible/dual fuel rates apply only to electricity that is used for heating buildings and heating water.

“Off-peak” electricity flows to a subscribing household only during hours when overall demand for electricity is low, usually at night. This benefits utilities because it reduces their need to invest in generating capacity, or purchase power, to meet relatively short periods of peak load, always a pricey proposition.

“Interruptible” electricity can be shut off for long periods to reduce peak demand. It’s also called “dual fuel” electricity because to qualify for an interruptible rate, an Arrowhead customer must have available another method for heating their home or other building while the electrical heat is shut off. The dual fuel must be automatic – designed to kick in even if no one is home or awake. Thus, wood stoves and fire places do not qualify.

Joe Buttweiler, Arrowhead’s director of member services, says unfortunately, “very few” households that were enrolled in the silver programs have made the shift to metered interruptible or off-peak rates.

“I think that you cannot sustain heating a home year round at the general service rate. You need to be on the off-peak rate or burning wood or something else,” he said.

How an Arrowhead customer might configure their electric usage to take advantage of off-peak and interruptible rates will vary, but the Smiths provide a good example. When their home was built, it was designed to heat primarily through electrical mats embedded in the concrete floors. These are a primary cause of those $600+ electrical bills. The Smiths can rewire those mats to get the interruptible rate if they also install a backup heater of some sort. That backup could be fueled by propane, for example, or it could be an electrical thermal storage (ETS) unit, which is essentially a radiator or a furnace filled with special thermal bricks. Those bricks are designed to heat up using off-peak electricity, say at night, then give off that heat the following day.

Calculating whether to install a back-up propane heater or an ETS system is complicated. It requires estimates of the up-front cost of both systems and the expected future costs of propane and electricity. Installing a back-up propane heater will almost certainly cost much less than rewiring a house and installing ETS units. But the cost of the energy to run those systems favors electricity over propane. At Arrowhead’s current off-peak and interruptible rates, Buttweiler said, you would need to buy propane at $1.05 per gallon to equal the cost of off-peak electrical heat and $1.20 per gallon to equal the cost of interruptible electrical heat. Right now, propane is running somewhere around $2 per gallon.

The Smiths decided to go with the ETS system, despite the higher initial cost. With both electrical mats and ETS units on the interruptible rate, they save two ways. Better yet, they can wire the off-peak hot water heater originally installed in their home into the same circuit as the ETS units, restoring the water heater to its low-cost service. The Smiths estimate the entire project will pay for itself in about six years.

If this sounds like a promising issue to investigate, the place to start is with a phone call to Arrowhead Electric (218-663-7239). They can send you an application for their EnergyWise programs and also have a list of electrical contractors who can help you make the required alterations and purchase the necessary equipment. To develop good cost estimates you will need to speak with an electrical contractor, and you might wish to consult a heating contractor on the costs of a propane back-up system for comparison.

You can make one change immediately that costs nothing but can have a big effect on household cash flow: Arrange with Arrowhead to put your electrical bills on a budget system that averages your yearly costs and lets you pay the same amount each month. It can be much easier to budget, say, $250 each month than come up with more than $600 a month during the coldest times each winter.