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.
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 the GREATEST!
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.
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.