Why are there so many ways to bill me for electricity?
If you’ve looked at your electric bill lately, you will find numerous line items for different charges, the two largest being Energy and Demand. So what are they and why pay for both?
Energy is power consumed over time.
If you have a 100 Watt (W) light bulb running for one hour, that uses 100 W * 1 hr = 100 Watt hours (Wh) or 0.1 kilowatt hours (kWh) of energy.
Conversely, Power is the rate that energy is consumed.
A 1000 W light bulb running for 6 minutes (0.1 hours) consumes the same amount of energy as the 100 W light bulb running for an hour — because the wattage is 10 times higher, it uses that energy 10 times faster.
Utilities have to ensure they have the capacity to provide not just the quantity of energy you need, but also deliver it at the speed you consume it.
So why charge me for demand instead of power?
Many large pieces of equipment have a high power draw when they first turn on. This power draw could be several times the amount of power it uses once it is operating, but it typically only lasts for a second. The utilities can average out some these very brief spikes over their thousands of users. What they measure instead is the average power you use over a slightly longer period of time, typically 15 or 30 minutes. This average power value is defined as demand. For medium to large commercial customers, utilities bill the highest demand value for the month as peak demand.
In much of the US, energy usage is seasonal and so utilities look to their annual peak load to plan for capacity. Utilities in these locations may implement a ratchet charge which shows up on your bill as billing demand or facilities charge. The ratchet charge allows the utility to bill customers not just for their monthly peak demand, but also their highest monthly demand for the past year.
In other words, turn up your thermostat a few degrees higher in August, or you may still be paying for summer’s cold AC in February.
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