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How Demand Billing Works
To best explain how Demand Billing works lets start with some real world
readings and
examine them as they are used by a utility when billing you. Then we
will look at ways to possibly decrease the amount we have to pay for our
power through the use of Power Factor Correction equipment.
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If you do not understand the components that make up your
electrical systems Demand (kW, kVA, kVAR), please read
the short article "What is
Power Factor?" for an overview before proceeding.
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Example
At the end of the billing period the utility records the
following Peak reading numbers at your facility:
kW = 100
kVA = 150
Power Factor = kW / kVA = 100 / 150 = 0.67 or 67%
These are the readings that the utility will use to determine
your Demand Billing.
You will have to check with your local utility to determine their
rate schedule, but for our example we will use $9.00/kW.
The general billing practice (with few exceptions) are to apply
their Demand rates to either:
A. 100% of the kW reading
or
B. 90% of the kVA reading
Whichever is GREATEST!
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Do not be misled by the term "Billed kW" as may be listed on
your utility bill. This term is used only
to indicate the reading value that rates are being applied to,
not whether its kW or kVA as they would have you believe.
Although it seems to infer that the demand
is based on kW, this number may in fact be either
the kW reading or 90% of the kVA reading depending on which is
largest and being used for billing purposes.
Example:
Hydro One - Conditions of Service 2011 brochure
(Above link opens in new window)
2.4.1.2 Components of Distribution Rates -
(found on Page 60)
Hydro One Distribution Service Rates
include a monthly service charge component and a
volume-based component. For Demand Billed Customers, the
volume Rate is a per kW charge. The billing demand shall
be taken as 90% of the kVA or 100% of the measured demand
in kW, whichever is greater. For Energy Only Customers,
the volume Rate is a per kWh charge. The monthly service
charge component is designed to recover some common costs
of Distribution Services that are independent of
electricity use. All other Distribution Service costs are
recovered through the volume Rate.
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To determine what value rates will be applied to in our example
lets have a look
100% of kW = 100
90% of kVA = 150 x 0.9 = 135
As we can see, 135kVA is the greater number, thus rates will be
applied to this reading.
So, our Demand Billing (or Billed kW as it may be called) for this period would be: 135 x $9.00 =
$1,215.00.
Reducing Costs
Now that we know how much we are billed and on what readings we
are billed lets look to see if we can reduce this cost.
In our example rates were applied to 90% of the kVA reading
because it was larger. Ideally, we would liked to have rates applied
to our kW because it is the smaller reading number. If we could do
that then we could realize a reduction in our utility billing. Just
how much?:
Cost if rates were applied to the kW reading: kW x $9.00/kW = 100
x $9.00/kW = $900.00
Potential reduction to the Demand portion of our electrical bill
if rates were applied to the kW reading:
$1,215.00 - $900.00 = $315.00
So what can we do to our electrical system so that rates are
applied to the kW reading? The most economical way of doing this is
through the installation of Power Factor Correction Capacitor Banks.
Power Factor correction has been around as long as electricity has.
It is the means through which we can tweak our electrical system to
make it more energy efficient, and by doing so we can ensure that we
are paying the least possible cost for our power. By correcting
the Power Factor here to above 90% ensures that no additional
expenses are being incurred. For more information please feel free
to contact us. |
