Demand charges
Demand Charges Explained
What a demand charge measures, why utilities levy it, how the fifteen-minute interval works, and why two plants with identical consumption can receive very different bills.
Subject area
Demand Charges
A demand charge bills you for the highest rate of consumption your facility reached during the billing period, usually averaged over a fifteen-minute interval, and it is priced in dollars per kilowatt rather than cents per kilowatt-hour. Two plants can consume identical annual energy and receive bills that differ substantially, entirely because of when that energy arrived. This section covers what the charge is measuring and why utilities levy it, how the demand interval is defined, the difference between facility, on-peak and coincident demand, what a ratchet clause does to a single bad afternoon, and how to locate the demand component inside your own statement. The arithmetic is not difficult. The definitions are where the money is.
Supporting analysis
Everything underneath the pillar, in this subject area.
Demand charges
Coincident and Non-Coincident Demand
One charge bills your own highest interval. The other bills whatever you were drawing when the grid peaked. They are different problems and they need different solutions.
Demand charges
Facility Demand, On-Peak Demand and Billing Demand
Three terms that sound interchangeable and are not. A tariff can bill two of them at once, which is how a successful load shift produces half the expected saving.
Demand charges
Four Coincident Peak — How ERCOT Transmission Costs Are Allocated
Four fifteen-minute intervals across one summer set a Texas facility's transmission charge for the whole following year. Here is the mechanism and what managing it involves.
Demand charges
PJM Capacity Tags and How Yours Is Set
In PJM your capacity obligation is derived from your load during a handful of summer peak hours, and it prices a charge that follows you through the next delivery year.
Demand charges
Ratchet Clauses — How One Afternoon Prices the Next Eleven Months
A ratchet sets a floor under billing demand based on an earlier peak. It multiplies the cost of a single bad interval by a factor most business cases leave out entirely.
Demand charges
The Demand Interval — Why Fifteen Minutes Decides Your Bill
The meter averages your load over a fixed interval and bills the highest average. Interval length, alignment and rolling versus fixed windows all change the number.
Demand charges
Why Utilities Bill for Demand at All
The cost causation argument behind demand charges, what it explains well, and the places where it is contested in rate cases. Worth understanding before you argue about it.