How Demand Billing Works
To best explain how Demand Billing works, here is an example with real world readings:
At the end of the billing period the utility company records the following 30 day average PEAK reading numbers at a facility:
kW=100 kVA=150
Power Factor=kW/kVA=100/150=.67 or 67%
The general billing practice is to apply the Demand Rate ($9.00/kW in this case) to EITHER: 100% of the kW reading OR 90% (the preset base power factor) of the kVA (productive power) WHICHEVER IS GREATEST.
In this case the higher is 90% of the kVA of 150 which is 135. That 135 times the billing rate of $9.00/kW=$1,215.00.
Reduce the Costs=Save Money
Ideally we would like to have the billing rate applied to our kW because it is smaller then the kVA. But what does that mean in dollars? In our case kW is 100 and the rate of $9.00 = $900.00. kVA is (per the above) $1,215.00. So potential reduction to the Demand portion of that month’s electrical bill is $315.00; multiplied by 12 and suddenly $3,780 becomes useable on other projects. This explains why we ask for 12 months of bills.
So what can one do to their electrical system so that rates are applied to the kW reading?
**The most economical way of doing this is the installation of Automating Power Factor Correction Capacitor Banks. Power Factor correction has been around as long as electricity. 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.**
In this case correction of the power factor to above 90% base power factor (set by the Electric Utility) ensures that no additional expenses due to penalties are incurred.
next page...Why Improve Power Factor?