Understanding
Demand / Energy
Rates and
Managing Your
Electricity Costs
An information guide for
commercial and industrial customers
1
Introduction
This booklet has been prepared to provide
information to customers who are billed on a
demand/energy rate. The information provided will
help you understand the concepts of demand/energy
and how you can use this information to control
your electricity cost.
Contents
Page
The electric service meter
2
Reading the kilowatt-hour dials
4
Reading the demand scale
6
The metering system multiplier
8
The rationale for demand/energy rates
10
Managing your electricity cost
14
2
The Electric Service
Meter
FIGURE 1 shows a typical combination energy and
demand meter, commonly referred to as a
DEMAND METER, which is used for nonresidential electric services.
Figure 1
A demand meter measures two distinctly different
values; ENERGY and DEMAND. To monitor your
electricity usage, it will be necessary to read and
record the energy dials and the demand register.
1. Energy is defined as that which does, or is
capable of doing work. In the electrical
industry, energy is the amount of electricity
used and is usually expressed in kilowatt-hours
(kWh). The electric service meter records in
kWh all the electric energy passing through it.
For example:
A one thousand watt (1,000 watts = 1
kilowatt) electrical load operating for five
hours (5 hrs) will use five thousand watt
hours (5,000 Wh) of electricity or five
kilowatt-hours (5 kWh).
3
2. Demand is the rate at which energy is delivered
to an electrical load. In the electrical industry,
demand is expressed in either kW or kilovoltamperes (kVA). Maximum or peak demand
refers to the maximum rate at which electric
energy is drawn through the meter during a
period of time. For example:
Electric Heat 10.0 kW
Water Heater 4.5 kW
Lighting
3.0 kW
Cooking
15.0 kW
32.5 kW
If all of the above were operating at the same
time, the demand would be 32.5 kW.
The relationship of demand to energy usage
(kWh) is that if the 32.5 kW of demand were in
constant operation for ten hours, the amount of
energy used would be:
32.5 kW x 10 hours = 325 kWh.
The electric service meter is an essential part of
providing electric service and is manufactured to
rigid standards of accuracy as required by the
Electricity & Gas Inspection Act of Canada. All
meters are tested for accuracy by the manufacturer
before shipment. Upon receipt they are tested and
sealed in accordance with the regulations of the
Federal Department of Consumer and Corporate
Affairs before being placed on your electric service.
The meters are also retested for accuracy at regular
intervals which vary depending on the meter type.
4
Reading The
Kilowatt-Hour Dials
An electric current passing through the meter causes
a measuring disk to rotate at a speed proportional to
the amount of energy being used. This
measurement is transferred through a series of gears
to the pointers on the energy dials of the meter. By
reading the energy dials on the meter you can
determine how much energy (kWh) you have used.
Figure 2
In Figures 2 and 3 there are four numbered dials.
Each pointer rotates in an opposite direction to the
one adjacent to it and the numbers on the dials are
in sequence for the direction in which each pointer
rotates. The dial pointer on the right (dial 1) rotates
clockwise, dial 2 counter clockwise, dial 3
clockwise, etc. As each pointer completes a full
revolution, the pointer on the dial to its immediate
left will rotate 1/10 of a revolution, i.e. 0 to 1, or 7
to 8 on the dial, similar to the odometer in an
automobile.
5
The energy dials of an electric meter are usually
read from right to left and the numbers are recorded
in the same order. When the pointer is between two
numbers, the smaller number is recorded.
Figure 3
The number of kilowatt-hours used during a given
period can be determined by obtaining the
difference between the dial readings at the
beginning and the end of the period. This is similar
to determining the number of kilometres driven in
your car during a given period by obtaining the
difference between the odometer readings at the
beginning and the end of that period. For example:
If the meter reading shown in Figure 2
(4641) was the reading recorded last month
and the reading shown in Figure 3 (7831) is
this month's reading, the kilowatt-hour
usage for this month's billing would be:
7831 - 4641 = 3190 kWh.
6
Reading The Demand
Scale
Figure 4
The demand scale shown in Figure 4 has two
pointers, one black and one red. The red pointer is
controlled by a thermal coil. As electricity passes
through the meter, the coil heats up, expands and
moves the red pointer up the scale.
As the red pointer moves up the scale, it pushes the
black pointer up the scale. When the amount of
electricity passing through the meter is reduced, the
coil cools, contracts and the red pointer moves back
down the scale. The black pointer remains
stationary indicating the peak demand supplied to
the service during the period.
7
This heating and cooling of the thermal coil does
not happen instantaneously. Approximately 25% of
the actual demand is recorded after one minute,
50% after five minutes, 90% after fifteen minutes
and 99% after thirty minutes.
The peak demand indicated by the black pointer is
recorded by the meter reader each month and the
black pointer is manually reset to the red pointer.
The reading recorded by the meter reader is
multiplied by the metering system multiplier,
described in the next section, and divided by 1,000
to determine the peak (kW or kWA) demand placed
on the electrical system during the billing period.
It is important to remember that the red hand
indicates the present demand on your electrical
system, while the black hand indicates the peak or
maximum demand used since our last meter reading
was taken. Your billing demand is the peak
demand recorded during the billing period.
Solid state demand/energy meters are becoming
more popular and are now the standard for all new
demand/energy meters purchased. These meters
record the average demand over fifteen minute
intervals and provide a digital readout instead of
using pointers or dials. This is similar to the
changes that have already occurred with most new
clocks, thermostats and gas pump registers, as well
as speedometers and odometers in automobiles.
FIGURE 5
8
The Metering System
Multiplier
Most demand meters have an internal multiplier. In
other words, the energy dials of the meter only
register a percentage of the actual energy used. To
determine the actual usage on the demand meter,
the registered usage must be multiplied by the meter
multiplier which is shown on the meter face. For
example, although the actual distance between two
cities may be 500 kilometres, it would be
represented by only 25 millimeters on a map. The
meter multiplier is similar to a map scale in that it
relates to the meter's scaled down reading of the
actual consumption.
As well as the internal multiplier, many meters also
have an external multiplier where the actual current
and voltage on the electric service are too large to
be registered by the meter. Current and voltage
transformers are used to reduce the current and
voltage before it enters the meter. Transformer
ratios are then used to determine the external
multiplier.
Therefore on many demand meters the metering
system multiplier to be used on the registered
energy usage and demand is a combination of the
internal and external multipliers. For example:
9
The metering system multiplier on a 600
volt, 400 amp electric service using a
demand meter with an internal multiplier of
two, current transformers with a ratio of
400/5 and voltage transformers with a ratio
of 600/120, as illustrated in Figure 6, would
be as follows:
Metering
System
Multiplier
= Internal Mult. x External Mult.
= 2 x (( 400 / 5) x (600 / 120))
= 2 x (80 x 5)
= 2 x 400
= 800
Figure 6
The metering system multiplier applicable to your
electric service is shown on your electric service
bill.
10
Rationale For
Demand/Energy Rates
The rationale for the application of demand/energy
rates to general service (i.e. non-residential)
customers lies in the nature of the costs incurred on
an electric utility system and the electrical load
characteristics of such customers.
Electric utility costs are made up of three
components. These components are usually
referred to as:
1. Customer costs: These are the costs of
connecting customers to the system and
maintaining their service. Included would
be a portion of the distribution system costs,
plus the cost of service drops and meters, as
well as the cost of meter reading, billing and
customer accounting. Customer costs are
related to the number of customers served.
2.
Capacity costs: These are most of the costs
associated with the provision of generation,
transmission and distribution facilities
required to serve the customers' loads.
Since the system must have the capacity to
meet customers' electrical needs the instant
service is required, capacity costs are related
to the peak load to be supplied even though
the peak may only be required for a short
period of time.
3.
Energy costs: These are the costs associated
with the actual generation of electricity
(kilowatt-hours). Included is the fuel costs
associated with generation of electricity,
plus a portion of the generation and
transmission facilities costs.
11
The importance of having separate demand and
energy charges for customers whose load
characteristics vary widely is shown in the
following example:
Consider two customers: Customer “A” has
a load (demand) of 80 kilowatts for 50 hours
and consumes 4,000 kilowatt-hours.
Customer “B” has a load (demand) of 20
kilowatts for 200 hours and consumes 4,000
kilowatt-hours. Both use exactly the same
number of kilowatt-hours during the billing
period, however the utility must provide a
system capacity of only 20 kilowatts for
Customer “B”, while it must supply 80
kilowatts of capacity for Customer “A”.
Customer “A”
12
Customer “B”
Assuming for this example, the
Company's cost per kilowatt of system
capacity is $5.00 and the energy cost
is $0.05 per kilowatt-hour. The
utilities average cost per kilowatt-hour
to supply Customer “A” is $0.15,
while the average cost per kilowatthour to supply Customer “B” is
$0.075.
Customer “A”
Capacity Costs
Energy Costs
Total Costs
Costs/kWh
80kW @ $5 = $400
4,000 kWh @ $0.05 = $200
$400 + $200 = $600
$600/4,000kWh = $0.15
Customer “B”
Capacity Costs
Energy Costs
Total Costs
Costs/kWh
20kW @ $5 = $100
4,000 kWh @ $0.05 = $200
$100 + $200 = $300
$300/4,000kWh = $0.075
13
Customer “A” & “B”
Avg. Cost/kWh
($600 + $300)/8,000 kWh = $0.1125
If both customers were billed only on the
basis of the average cost of $0.1125 per
kilowatt-hour with no demand charge,
Customer “B” would be paying more than
the cost of supply, thereby subsidizing the
electricity cost for Customer “A”. By
having separate demand (capacity) and
energy charges, the rate to these customers
more fairly reflects the cost of serving each.
In theory all customers should have separate
demand and energy charges. However, demand
metering is much more costly and experience has
shown that residential customers have similar load
characteristics. Small general service customers are
also quite similar to one another. Therefore the
demand and energy components are combined for
such customers and the resulting rate consists of a
“Basic Customer Charge” and a “Kilowatt-Hour
Charge”. The load characteristics of general service
customers with demands over 10 kW vary widely,
therefore they are billed on the demand/energy rate
with separate “Customer”, “Demand” (kW or kVA),
and “Energy” (kWh) charges.
14
Managing Your
Electricity Costs
For customers billed on Demand/Energy Rates, the
opportunity for reducing electricity cost goes
beyond just using less electricity. To determine if
electricity cost savings are possible, the following
questions must be answered:
1.
How much electricity is currently being used
(monthly kWh usage and kW or kVA
demands)?
2.
How much are you paying for it?
3.
When and where is the energy being used?
Items one and two can be answered using
information from your electricity bills. Your 12
month account information can be viewed online or
to request a copy to be emailed or mailed to you,
contact Newfoundland Power.
To answer question three, you will have to
determine when and where electricity is being used
over a typical 24-hour period. Simply record the
demand on an hourly basis. That means reading the
red hand by identifying where it points on the
demand scale of an analog meter or reading the
demand numbers in a digital meter display. Record
these readings and also record which equipment is
operating at the time when the readings are done.
Figure 7 shows a typical daily load profile.
15
Figure 7
In this example, equipment begins operating at 6:00
a.m. More equipment continues to be turned on
until a peak is reached at 11:00 a.m. The peak falls
off significantly at 12:00, possibly due to lunch
break. Equipment is turned on again after lunch till
a peak is reached at 2:00 p.m. At 4:00 p.m. a
significant reduction in demand occurs, probably
closing time, and the demand remains fairly
constant with a base load of heating, ventilation and
lighting loads operating until start-up for the next
day.
For most customers billed on demand/energy rates,
the use of an automated or manual system to limit
the amount of electrical equipment permitted to be
in operation at the same time will reduce the billing
demand, improve the load factor (LF), and reduce
electricity costs. Load factor, expressed as a percent, shows the relationship between what was
actually used and what could have been used during
the billing period, if the peak demand was used for
the full time. If peak demand had been used for the
full billing period, the load factor would be 100%.
16
This is the most effective use of the power and has
the lowest cost per kWh.
To determine the load factor, you can use the
following formula:
Total kWh for the billing period
(Peak Demand X # of Days X 24 Hours)
EXAMPLE:
Total kWh = 18,000 kWh
Demand = 50 kW
# Of Days = 30
Hours/Day = 24
=
18,000 kWh
(50 kW X 30 Days X 24 Hours)
=
18,000 kWh
36,000 kWh
=
0.50
= 50%
In this example, the Load Factor is 50% showing
that, on average, the peak demand was fully used
for 12 hours a day for 30 days.
One of the simplest ways of improving load factor
is to “shave the peaks”, as illustrated in Figure 8
and Figure 9. “Shaving” means having a portion of
the electrical load now operating at peak times of
the day shifted to non-peak times. For example,
instead of operating ten machines at 11:00 a.m., it
would be advantageous to have two operating at
10:00 a.m., six at 11:00 a.m. and two at 1:00 p.m.
All machines are still operating but not at the same
time.
17
Figure 8
Figure 9 shows the daily load profile after the peaks
have been shaved. The dark shaded peak area in
Figure 8 has been shaved and relocated in Figure 9.
Figure 9
18
On electric services metered in kVA, where much
of the load consists of fluorescent lighting,
induction motors and transformers, the installation
of power factor correction equipment can improve
the load factor and reduce electricity costs. Power
Factor (PF), is the name given to the ratio of
productive power measured in kilowatts (kW) to the
total power measured in kilovolt-amperes (kVA).
Power factor is usually expressed as a percentage.
In an electric service containing resistance only,
such as incandescent lighting and electric heating,
the power factor is 100% and kW = kVA.
However, on services using inductive apparatus
such as fluorescent lighting, induction motors and
transformers a combination of two kinds of power is
used:
1.
Productive power does the actual work and is
expressed in kW.
2.
Non-productive power does no productive
work but creates the magnetic fields
necessary to operate the inductive apparatus
and is expressed in kilovars (kVAR).
The combination of these two power components is
the total or apparent power expressed in kilovoltamperes (kVA).
The non-productive power required by electric
services with inductive loads reduces the customer's
system capacity and increases power costs for the
utility. Therefore, on larger electric services where
the peak demand recorded in the most recent twelve
month period exceeds 100 kW, the billing demand
is based on kVA and a kVA demand meter is used.
19
If you are billed on one of our kVA based rates and
much of your electrical load is inductive, we can
measure the power factor on your service.
However, since the power factor will vary
depending on the loads in operation on your service
at the time of measurement, prior arrangements
should be made to have the measurement taken
when your electrical load is at or near the peak
demand.
If the power factor measurement is less than 90%,
an electrical consultant should be engaged to do a
detailed study of your electrical loads. The
consultant will determine the best size, type and
location of equipment to be installed to increase
your power factor so it is as close as possible to
unity or 100%.
The effect of power factor improvement on electric
service capacity can be seen from the following
example:
Monthly demand at 75% power factor
is 500 kVA. Capacitors are installed
to increase power factor to 95%. New
monthly demand is:
500 x ( 75 / 95 ) = 395 kVA
The resulting increase in your electric
service capacity for future load growth
and reduced demand for billing
charges is:
500 kVA - 395 kVA = 105 kVA
20
This effect of load factor on your average cost per
kilowatt-hour* can be seen in the graph below.
Increasing load factor can reduce average cost per
kWh.
Load Factor
Effect of Load Factor
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
$0.05
$0.07
$0.09
$0.11
$0.13
$0.15
Cost per kWh
* Average cost per kilowatt-hour includes energy and demand
charges.
Most of the information required to determine
where electricity costs can be reduced, comes from
the knowledge you have of your business. By
walking through your premises you can determine
where much of the energy and demand is being
used. Take a note pad on your walk to record the
electrical load rating of any motors or other
electrical apparatus on the premises.
The following is a starting list of items that can help
reduce your energy consumption and demand:
1. Turn lights off when possible.
2. Reduce lighting levels in overlit areas. Take
full advantage of natural light and use light
color paints to help reflect light.
3. When replacing bulbs or fixtures, consider using
more efficient lower wattage incandescent bulbs
or the new energy efficient compact fluorescent
bulbs. Consider installing more efficient light
fixtures, (i.e. 1 - 40 watt fluorescent tube will
21
give approximately the same light output as 5 40 watt incandescent bulbs and a fixture with 1 100 watt incandescent bulb gives twice the light
of a fixture with 4 - 25 watt incandescent bulbs).
4. Set thermostats lower during the winter heating
season (21°C or 70°F) and maintain higher
settings for air conditioning during the summer
cooling season (25°C or 77°F). Verify,
thermostat settings with a good quality,
thermometer to make sure they are adjusted to
provide the desired temperature. A marker can
be used to indicate the correct set-point on the
thermostat.
5. Eliminate heating and air-conditioning from
vestibules. The airlock effect of the vestibule
itself will probably be sufficient. If employees
near the entrance complain, it is more
economical to install individual heating units
near the employees.
6. During periods when the building is unoccupied
such as at night, weekends and during shutdown
periods, reduce thermostat settings for heating
and increase settings for air conditioning. If the
building or a portion of the building is going to
be vacant for an extended period, you may be
able to completely turn-off the heating and air
conditioning systems.
7. Cut water heating cost where possible by
reducing the temperature of the hot water,
reducing the amount of hot water used and
adding insulation to uninsulated or poorly
insulated units. Also, fix dripping taps and take
advantage of any heat that may be available
from processing or other sources to supply or
supplement your water heating requirements.
22
8. Use caulking and weather stripping to seal off
air leakage and infiltration. Check insulation
levels and install or upgrade where practical.
9. For best comfort, maintain humidity levels
between 40% and 60%.
10. When purchasing new equipment, machinery
and motors or replacing existing units, make
sure the unit is energy efficient and properly
sized for the task. Check manufacturer’s
efficiency ratings and specify high efficiency
units when ordering.
23
For more information
about how you can get the
most out of your electricity
dollar visit our website
www.newfoundlandpower.com
or call our
Customer Contact Centre at
737-2802 or 1-800-663-2801.