Gas and electric utility rate structures and regulatory rules typically classify industrial customers as a unique class. Industrial customers include manufacturing, construction, mining, agriculture, fishing, forestry, electronics, and food processing. Large industrial users of electricity include aluminum, chemicals, cement, forest products, glass, metal casting, petroleum refining, pulp and paper, and steel. Some utilities classify industrial customers according to usage levels rather than attempting to evaluate end user types. For instance, a typical break point between commercial and industrial electric customers is 500 or 1,000 kW of peak demand.
Industrial uses for electricity are dominated by machine drive, with other significant uses including process heating, HVAC (heating, ventilating, and air conditioning), electrochemical processes, process cooling, and lighting. Because much of industrial usage is for manufacturing that runs year-round, usage does not fluctuate considerably from month to month. In fact, usage during the lightest months (mid-winter) is generally only 10% lower than peak months. Usage across the day does not vary as widely as other customer groups since many industrial facilities operate around the clock. Industrial electricity usage from year to year swings much more widely than the other sectors due to business cycles.
Industrial uses for gas vary greatly by customer type. Significant users of natural gas include the pulp and paper; metals; chemicals and petroleum refining; stone, clay and glass; and food processing industries. Uses for gas include waste treatment and incineration, metal melting, glass melting, food processing, drying and dehumidification, heating and cooling, and cogeneration. Natural gas may also be used as a feedstock for the manufacturing of products such as fertilizers, chemicals, and pharmaceuticals.
(CHP = Combined Heat and Power, HVAC = Heating, Ventilating, and Air Conditioning)
While industrial demand is generally driven by business cycles, industrial customers are also more likely to be price responsive than any other customer group as energy costs are often a significant factor in their cost of doing business. These customers are also much more likely to have alternatives than other customer groups. If energy rates get too high, manufacturing might be moved to lower-cost states or even other countries. And some electric customers have the option to generate their own electricity when it is cost-effective.
Many industrial customers are also well-suited to price-responsive actions with their demands. Demand can often be shifted to lower price periods, energy efficiency measures can significantly reduce electricity consumption, and many industrial customers can handle periodic interruption of power or gas supply allowing them to take advantage of cheaper interruptible rate schedules. Industrial customers commonly have the internal expertise and capital to evaluate and implement cost-saving options and/or can afford outside energy expertise.