During certain periods the local and the national network of electricity lines faces congestion. This is due to an unusually large demand for electricity, such as on an especially cold winter evening when everybody is using electricity at once. In these situations, either the local lines cannot cope with this demand or the constraint is somewhere on the national grid.
One possible response to this from the lines and power generation companies is to build lines with larger capacity and more power stations. However, as these congestion periods are infrequent and last for only a few hours at a time and in one year amount to only about 100 hours, this is a very expensive option. Instead lines companies incentivize customers to reduce their load during these periods by charging special congestion period charges. These charges are based on demand during these periods. If a company wants to reduce these charges it needs to reduce its load on the network during these periods. Approximately 30% of the University of Otago's electricity charges come from congestion charges. The energy team therefore actively manages electric appliances around the University to try and reduce load during these periods. This saves the University money.
One way of reducing load is to generate electricity yourself, which companies often do by using gas and diesel generators. Coal and gas fired generators on the national grid are also often used during these periods. This means that during congestion periods each kWh or electricity is associated with greater greenhouse gas emissions than usual. This is another reason to reduce load during these times.
For more information on congestion charges please see this document from Aurora. www.auroraenergy.co.nz/assets/Disclosures/AE-S015-Pricing-Methodology-2016-17.pdf