Understanding Electric Demand Rates

Leo G

I posting this from another forum. I was hoping to give this guy some help. It would also help me out as I am in the same boat as this guy only I bet his electric bill os outragious. Thanks for any information.



"We are in the process of upgrading to a larger dust system and I am trying to understand the demand charges on my electric bill. A dust collector is the most used tool in a shop . I been doing some internet research and talking to the power company but still do not totally understand this. Last year the shop was closed for a 3 week vacation and the power bill was the same with only 1 week working. Demand keeps going up, that I do know. Our power company does not have peak times and the rates are the same at any hour of the day. They tell me it is measured on 15 minute intervals and we are charged for peak usage. We have soft starters on all the large motors now except the DC and try not to start big motors at the same time. We try not to run bigger machines at the same time but this can be counterproductive at times.
My question is-do the demand charges come from starting big motors (10 to 25 HP in our case) or the long time running of these motors? And is there a way to measure the demand cost of say a 15HP vs. 20HP? I’m sure the soft start helps. In the case of the dust collector we are considering a VFD so we can turn it down a little when using smaller machines. This is a $2500 option and I wonder if the few times the DC is full power we might get nailed anyway. Also looking at using 2 smaller HP fans in the same system. I saw a system in Germany that had a separate fan and pipe for each machine going to a large bag house. The initial cost to do that must be high. I am trying to weigh the additional costs against any power savings.
Any information appreciated."

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mdshunk

I guess I still don't fully understand demand charges. I always thought it was the difference in the highest 15 minute demand period of the month when compared with the average 15 minute period of the month.

Sounds like an excellent question for the power guru's at www.mikeholt.com

Leo G

Here is one of the answers I got from another forum I thought I'd share here.


"Electric rates are typically charged on a demand and energy basis for larger commercial accounts. Residential meters only measure flow; they do not capture the usage at any one moment (or 15 minute interval) in your case.
The larger portion of most rates is the demand portion. In your case, they will look at the peak demand (which is the largest kW usage in any of the 15 minute periods). That amount will be multiplied by your demand charge to get the demand portion of the bill.
The meter will also capture the flow based on integrating the 15 minute data. This will be a kW/hr number and will be multiplied by the energy portion of the rate.
Both of these numbers are added together for a total bill. The fact that the Demand portion is much higher (even more so in utilities with high fixed cost plants like nuclear or coal) could have been the cause of your bill being just as high in the month where you did not work 3 weeks. The Demand Charge portion of your bill will remain fairly constant as long as each day you work is fairly standard. The demand portion is an attempt to capture the fixed costs of power plants while the energy portion is designed to capture the variable costs such as fuel. Residential rates have a Demand and Energy portion also but the residential meters do not capture the data so both rates are multiplied by the kW/hr number."

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CE1

My understanding is that the demand charge is a charge for the highest peak demand for the month in any 15 minute period and it ratchets to the higher value whenever the previous value is exceeded. So what happens is that if all the equipment in the facility is started at the same time just one time during a billing cycle, this will be the basis for the demand charge for the entire month. The best way to control the demand charge is not to start everything at once and just leave everything running once the equipment is started.
There is equipment out there that can be installed to monitor the electrical power usage for a building besides what the power company supplies on the pole. I have installed electrical power meters that have lights, buzzers, horns, and computer interfaces that tell the facility that they are getting close to a target demand and not to start any other machines or equipment until the demand/usage goes below the predetermined threshold. One product that I have used a lot is made by E MOM and it has saved some customers a lot of money in electrical use charges.

RobertWilber

the way I was given to understand it is that you have to pay what it costs them [power company] to be ready and able to deliver what you want when you want it, even if you only want it once
... sort of like paying to store gasoline in case you need extra gas NOW. If you EVER need 2000 gallons, then you have to have a 2000 gallon tank there for your use at all times. If all you ever need is 5 gallons at once, then you only have to pay for a jerry can...

Sparky Joe

That is exactly how it was explained to me, except for the whole 'jerry can' thing.

Soft starts, as I understand them are for very large motors and are not for cutting down on inrush currents because these currents are still being absorbed by resistors, their main reason is to protect the windings of large motors that take a few seconds or more to get up to running speed.

In my opinion VFD's would be your solution, although instead of using them like a band-aid, here and there, you should get someone in to evaluate your setup and tell you what would be most effective. In fact I'm pretty sure the power company would come in and do this part of it for you for free.