Commercial electricity bills can be confusing, especially if you don’t know what’s behind your charges. Well, TweeterDeeter is here to help – it’s time to tackle demand charges! One of the most confusing parts of a bill is demand. I’ve decided to try two routes to explain demand to you. The first is a technical explanation of what demand is. The second is a fairy tale explanation of demand that I hope makes this post more fun.
Utilities offer many different rate plans and the more electricity you use, the more complicated your bill becomes. Demand charges are most common for commercial utility bills. First off, you’re billed for the total amount of electricity you use during a month. Your usage is measured in kilowatt hours (kWh), and is typically listed as “generation charges” on your bill. Basically, your utility bills you for the electricity they’ve generate for you. Electricity is not easily stored #ForNow and needs to be generated “instantaneously” to match current use. This means, a utility must always have enough power plants running to meet everyone’s electricity demand. The utility must be prepared for everyone turning on their AC at once. Constructing power plants is expensive, so utilities have two strategies to recoup this cost. The Time-of-Use rate schedule, which we explained in a previous post, is currently being adopted for all commercial customers. Time-of-Use means rates vary according to the time of day electricity is used. You’re also billed for your demand or, in other words, the most electricity you used “at once.” Demand is usually billed as “delivery charges” and is measured in kilowatts (kW) monthly. To use a metaphor, if you received a driving bill, you would be charged your distance traveled (Generation) and your top speed (Demand).
Not-A-Fake Case Study:
Congratulations, you’re the owner of ABC Microwaves! Your business model is simple, but some wonder how you stay in business #MoneyLaundering. ABC offers customers a lit, air conditioned place to microwave things #Visionary. The building has ten 13 Watt CFL’s, two 1000 watt microwaves, and a 3500 watt air conditioner. Simple Utility Co. charges $.10 per kWh used and $20 per kW for demand.
10*13 watts + 2*1000 watts + 3500 watts = 5.6 kW * $20/kW = $112
5.6 kW * 12 hours * 30 days * $.10/kWh = $2,016
Total Bill: $2,128
Demand charges come in all different shapes and sizes. Some utilities have set this “high-water mark” for each month and others consider your maximum use for the past 12 months. They also may vary with the time of day, seasons, and measurement intervals. There are many ways to cont
rol your electricity bill and not every business needs to pay demand charges. If you would like a free bill analysis, drop us a line!
A Demanding Fairy Tale by TweeterDeeter
Once upon a time in the Land of Ateeman, there lived King Danny. King Danny had many subjects in his village. The people were thankful to King Danny because he provided them wells for clean water.
Of course, the King charged a toll to use his wells. King Danny loved bacon and to fuel his appetite, he required that his subjects pay him 1 pig for every 100 gallons they used. During the summer however, the farmers needed more water causing the wells to run dry. In order to meet this demand, King Danny drilled more wells. Drilling new wells became expensive so he instituted a new type of water toll called demand. Demand taxed subjects based on the maximum amount of water they picked up at a time. In Ateeman, the rate for demand was 1 pig/400 gallons picked up.
If a farmer picked up two thousand gallons three times in June, he would pay King Danny 5 pigs for the demand in addition to the 60 pigs for the water. King Danny hoped his subjects would collect less water per trip, helping maintain the water table #HydrologyKing.
Luckily, the Solar Knight Deeter came to rescue the villagers of Ateeman. He travelled to medieval farms and water parks drilling wells for the people. The people weren’t aware they could pump their own water and keep their bacon at home! Poor King Danny had less bacon, but still went on to invent the Wendy’s Baconator. #TheEnd
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