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understanding demand billing

What Is Demand?

The term "demand' refers to the demand made by the customer upon the Company for the reserve of certain capacity. Whatever the energy requirements may be, we must maintain facilities with sufficient capacity to meet the maximum requirements of our customers. Even though these facilities may not always be used at full capacity, they are nonetheless required so that the electricity is available to customers whenever they want it. The demand charge reflects these capacity-related costs.

What Does a Demand Meter Do?

A simple way of thinking about how a demand meter works is to compare it to a water faucet and a bucket of water. If you turned on a water faucet, water would flow out and fill a bucket. If you continued to open the valve, water would flow out of the faucet at a greater rate (the demand for water) and more water would be delivered (the water used). One way of measuring the rate of water coming out of the valve might be in gallons per hour. You would want to know this so that you could provide the piping and pressure needed and have adequate supplies of water available to support this level of water "demand." You'd also want to know how much water was delivered for the customer to use so that you could bill for the service.

Unlike water, electricity cannot be stored - but the concept is similar. A demand meter is like the water faucet and bucket. It records the electricity used (measured in kwhrs) and the rate of electricity used (measured in kW) in 30-minute intervals.

How Demand Billing Works

There are two energy-related charges in demand billing. One is for the amount of electricity used during the entire billing period - this is the energy charge (measured in kwhrs). Relating to the previous example, this would be -equivalent to the gallons of water used. The other charge is for the greatest amount of electric power used in any one-half hour during the billing period - this is the demand charge (measured in kW or kilowatts of demand). Again, relating to the previous example, this would be equivalent to the rate of water used (measured in gallons per hour).

How Customers Can Reduce Their Demand

Since the demand is measured in 30-minute time spans through- out the day, it may be possible for customers to reduce their demand by spreading load over a longer period of time (i.e., not turning on heavy machinery all at once whenever possible).

Significant energy savings can also be achieved by retiring old cooling systems, motors, and lighting equipment and replacing them with energy-efficient equipment. For more information on energy efficiency and energy audits, customers can call the Enlightened Energy Guideline at 1-800-343-4646 or the Economic Development Department in your operating area.

What Is the Load Factor?

There is a relationship between kilowatt-hours used and kilowatts of demand called the load factor. That is, the load factor is an expression of the energy used (recorded in kilowatt-hours) in relation to the maximum rate at which energy is used (recorded in kilowatts of demand).

How Load Factor Calculated?

The formula to calculate the load factor is: total kilowatt-hours (kwhrs) in the billing period divided by the result of multiplying the number of days in the billing period times 24 hours times the maximum demand (kW) in the billing period; multiply the answer by 100 to get the load factor:

[kWhrs / (# of days in billing period x 24 hrs x billable demand [kw] ) x 100 = % LF]

For example, if the customer used electricity at the maximum rate for each and every 30-minute period in the billing period, the resulting load factor would be 100%. If, on the other hand, the maximum demand is used for only half of the billing period, the load factor would be about 50%. Normal load factors range from 10% to 60%. Property Protection periodically generates and reviews ad hoc reports of load factors outside of this range.


