HVACR designers put much effort into specifying systems and equipment that use electrical energy efficiently. To ensure you are making the right decisions when justifying the cost of improvements in system efficiency with savings to be realized on the owner's electric bill, it is important to understand the basics of electric rate structures and how utilities charge customers for electric power. This month, we will review the basics, and in the next column we'll discuss some rate options that can provide savings opportunities for your clients.

Customer Charge

Most utilities assess some type of fixed monthly charge for the privilege of receiving electrical service from them. Variously known as a service charge, basic charge, or meter charge, this is usually a nominal amount that is a relatively insignificant portion of the bill for a large customer. Obviously, your design decisions have no impact on this cost unless they affect the number of services required for a facility.

Energy Charge

One of two major portions of the bill is the energy charge, which is typically based on a rate expressed in dollars per kWh. The unit of electrical energy measurement is the kWh, obtained by integrating power in kW over time. This rate, which can range from a few cents to over ten cents per kWH depending upon the location, the time, and the type of service, is based primarily on the utility's cost of fuel and other operating costs that are proportional to the amount of power generated and consumed.

Energy charges are applied to each kWh consumed by building equipment. A system that consumes 100 kW and operates 2,400 hours per year at a rate of $0.35/kWh would generate an annual energy cost of $8,400. Under some rate structures, the energy charge may vary with the time of day, the month of the year, or based on incentives that the utility and/or the public regulatory agency wish to promote.

Demand Charge

The other big slice of the electrical cost pie is the demand charge. This charge is intended to provide recovery of the capital cost invested by the utility to build the capacity in the generation, transmission, and distribution systems that is required to serve the customer's load. The demand charge is based on the highest rate at which the customer uses electric energy in a specified period, usually a month, because this is what determines the size of conductors, transformers, and other equipment needed to serve the load. The rate is expressed in dollars per kW, and is applied to each month's bill based on the highest demand measured during the monthly billing period.

If the 100 kW system described above adds load to a facility that has a $6.00/ kW demand charge and it will operate during the facility's peak period every month of the year, it will add 100 kW times $6.00/ kW/month times 12 months or $7,200 to the facility's annual electric bill due to demand charges. This is in addition to the $8,400 calculated above for the energy charge.

Demand charges also vary with time of day, month of year, and other conditions based on the specific utility and their regulatory agency. It is common for utilities to have higher demand charges during the months when their load peaks, typically the summer months for the southern part of the country and the winter months for the far north.

Motor Starting

I frequently get questions from operating engineers concerned about scheduling the start of large motors such as electric drive chillers to avoid demand charges due to the high inrush currents. This concern, usually unjustified, is based on misunderstanding of the nature of motor starting currents, and the manner in which the utility calculates demand.

Clearly, if you have a demand charge that varies with the time of day, starting and running a chiller during the period of the higher demand charge risks increasing your electric bill if the additional kW sets a monthly peak for your account. In this case, if you can delay bringing the chiller on-line until the lower demand charge is in force, you can reduce the risk of a higher demand charge. This effect, though, is due to the running kW of the chiller and not to the act of starting it.

When starting a motor, the current is high (typically 6 to 8 times the running current) but at a low power factor representing largely reactive load that is not recorded as energy by the utility meter. Starting kW is actually in the same ballpark as running kW. Even if starting kW exceeds running kW, the effect on the billed demand is minimal because the utility demand is calculated over an interval that exceeds the starting period of the motor; 15 minutes is typical. ES