Understanding Demand

What is Demand?

“Demand” is the total amount of electricity being used by a customer at any one time. Demand varies from hour to hour, day to day and season to season. This usage, which is expressed in kilowatts (not kilowatt-hours), is called “demand” on the system. For the majority of commercial customers, Laurens Electric Cooperative monitors demand over a 15-minute period. The customer is charged for the highest 15-minute average recorded on the demand meter. After Laurens Electric reads the meter each month, demand is reset to zero and the meter starts over, recording the highest 15-minute average for the next billing period.

 

What is Demand Charge?

Demand charge is based on each customer’s maximum 15 or 30-minute demand on the cooperative’s distribution system each month. Demand is measured in kilowatts (kW). Customers are billed according to kW of demand for their rate.

To illustrate how demand charge can affect an electric bill, look at two simple examples:

  • Running a 20 kW load for one hour would result in usage of 20 kilowatt hours (kWh) and accrue a demand charge of 20 kW.
    20 kW x 1 hour = 20 kWh.
    Demand = 20 kW.
  • Running a 2kw load for 10 hours would also result in usage of 20kWh but would only accrue a demand of 2kW.
    2 kW x 10 hours = 20 kWh.
    Demand = 2 kW.

Both examples use the exact same amount of energy (20 kWh) and perform the same amount of work. However, the resulting bills will be very different.

Applying a rate demand charge of $3.00 per kW and an energy charge of 5.00 cents per kWh to both examples produces the following results:

Bill Number 1
20 kW x $3.00 = $60.00
20 kWh x .05 = $1.00
Total = $61.00

Bill Number 2
2 kW x $3.00 = $6.00
20 kWh x .05 = $1.00
Total = $7.00

 

Why so different?

The actual energy (kWh) used is the same, and the work done is the same. The difference between the bills is based entirely on the highest demand recorded during any given 15-minute period that month.

Why are demand charges used?

Demand charges are the way your cooperative pays for generation and distribution capacity it needs to meet peak demand that occurs from time to time. The demand charge your cooperative pays to its wholesale power supplier is also calculated on the basis of the highest demand during the month. Laurens Electric uses the same method to bill demand to its demand-rate customers.

Are demand charges unique to Laurens Electric?

No. Demand charge billing is used consistently in the electric utility industry.

How can demand charges be reduced?

To reduce demand charges, simply examine your operation.

  • What energy-efficiency improvements can be made?
  • Does all of the equipment need to be running at the same time?
  • If not, what can be turned off while other equipment is running.

Often there is equipment that is operated infrequently. If this is the case, can some other equipment be turned off while this equipment is running? The result may be a significant savings in your monthly demand charge.

It is helpful to know when your meter is read by Laurens Electric. If possible, wait until after the meter has been read to run equipment that is operated infrequently.

For example, test your air conditioner in March instead of waiting until you need it on a hot day in April, only to discover that it is not running properly. You know that the meter is read on the 25th of each month. It is best to wait until after March 25 to test the air conditioning instead of operating it for a short period of time before the 25th. If you operate the air conditioner before the meter is read in March, you will be billed for the energy used by the air conditioner plus a demand charge for the entire month. Waiting until April could save some money.

What else can be done to reduce demand charge?

Consult with Laurens Electric to help evaluate ways to improve the energy efficiency of your operation.