Your demand charge is set by the highest average power your facility draws over a short metering interval each month, usually 15 or 30 minutes. Five things decide how high that number is and what it costs you, and most of them are visible on your bill and your interval data.
How demand is measured
Utilities bill energy (kWh) and demand (kW) separately. Demand is the highest average kilowatts reached and sustained over a 15- to 30-minute interval in the billing period (utility explanation). The charge pays for the transformers, lines and substations that must stand ready for your peak.
Because demand is an average, brief events barely move it. A 100 kW motor that draws six times its running current for 5 seconds at start adds about 500 kW for 5 seconds. Averaged over a 15-minute (900-second) interval, that is roughly 3 kW. What sets your demand is how much load runs at the same time for most of an interval, not momentary spikes.
5 things that drive your demand charge
- Loads running at the same time. Chillers, air handlers, pumps, compressors and process equipment that run together in the same interval set the peak. Staggering start times and shifting flexible loads out of the peak interval can lower it without reducing what the facility does.
- Check: find the interval that set last month’s peak and list what was running then.
- A ratchet clause. Under a ratchet, billed demand is the larger of this month’s peak or a percentage of an earlier peak. A typical ratchet uses 80% of the highest peak in the previous 11 months (PNNL), so one summer spike can raise your bills for most of a year.
- Check: look in your tariff for “ratchet”, “minimum demand” or a percentage of a prior peak. Compare billed demand with metered demand on each bill.
- Power factor. Many tariffs raise billed demand when power factor falls below a set level, often 90%. Two utilities that do: billed kW = peak kW × 0.90 ÷ your power factor (Austin Energy, Minnesota Power). At 70% power factor, a 100 kW peak is billed as about 129 kW. Others bill demand in kVA, which has the same effect.
- Check: look for “power factor”, “kVA” or “reactive” on your bill and in your tariff. If none appears, power factor is not costing you on this account.
- Your rate schedule. Utilities offer several commercial and industrial schedules, and a facility’s load may have changed since it was placed on one. Some schedules charge demand only during on-peak hours, which rewards moving load.
- Check: ask your utility account representative which schedules you qualify for and to compare a year of your bills under each.
- What you can’t see. Monthly bills show one peak. Interval data shows every 15-minute block, so you can see when peaks happen, how often, and what they line up with.
- Check: request 12 months of interval data from your utility. Many utilities provide it on request for demand-billed accounts.
Where to start
If two or more of these checks raise a question, start with your bills, your tariff and 12 months of interval data. Together they show what set each peak and which parts of the charge you can influence.
LIS Analytics offers a $2,500 Quick Scan that reviews them for you and reports which peaks were avoidable and what to do next. It needs no new equipment, and the fee is credited toward a Full Forensic Assessment within 30 days.
Request a Quick Scan · mica@lisanalytics.net · (610) 835-6556
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