In my last column, we presented basic energy and demand components of the electric bill. This month, we'll review some more complex features of electric rate structures and some common rate options that you should be aware of.

Power Factor

The power factor (PF) of an electric load, expressed as a percentage, represents the fraction of the total current drawn by the load that produces kW of useful work (see "Current Affairs," August 1999 for more discussion of power factor). Because utility lines and transformers are sized for total current but rates are based on kW, utilities apply penalties to low power factor loads to reflect the increased system investment required to serve them. A common method of implementing this is an adjustment of billed demand based on power factor below a set minimum. A utility with a 95% minimum may calculate billing demand for a month in which the customer's power factor is less than the minimum as follows:

kWbilled = kWactual x 0.95

In the past, the major contribution to low power factor in commercial buildings has been AC motors, which operate anywhere from 50% to 90% power factor depending on hp rating, speed, and load. This has greatly improved with the widespread application of VFDs, which can now achieve 95% power factor over the operating range of the motor. If low power factor remains a problem, the available demand charge savings may justify the cost of correction, but a harmonic analysis should be done before adding power factor correction capacitors to a system that also serves VFDs.

Demand Ratchet

Another common feature is a rule that sets the minimum billed demand for any given month at a set percentage of the highest monthly demand in the preceding 12 months. Setting a one-time peak during an unusually hot summer month, for example, results in added cost for the next year, by effectively "ratcheting up" the monthly demand charge in the following months. This can be a major cost factor for plants using electric drive chillers during the summer months.

Time-Of-Day Service

Most utilities offer some version of time-of-day service, in which higher rates are established for daytime hours during the week, when their system load is high, than for nights and weekends when it is low. The rate difference between on-peak and off-peak rates may affect either or both the energy and demand charge. This rate structure provides an incentive to shift load to off-peak hours and is a key factor in cost justification of systems such as chilled water or ice storage.

Load Control

Rate incentives for load control or curtailment take many different forms, but are all based on the customer's ability to reduce their load during periods of peak system demand when requested to do so by the utility. Load may be reduced by turning off or cycling equipment within the facility, or by transferring all or part of the facility to on-site generation. Some of these rates require the customer to contract for a specific demand level that they will drop below when called on; others contract for a specific amount of reduction, regardless of demand. Contracts also typically limit the quantity and duration of load control periods.

In our area, these rates have been instrumental in encouraging facility owners to use existing standby generators for this purpose as well as serving as an incentive for generator additions. The maximum savings available here, approximately $54/kW/yr, won't cost-justify an installation under most organization's payback criteria, but it provides added incentive if there are also other reasons for considering additional generation, such as reliability concerns. The higher operating hours, however, may affect environmental permits.

Voltage Discounts

Most electric service is delivered at "secondary" voltage, usually 480V. Large loads and/or multiple buildings on a single site may justify accepting service at the utility's distribution or "primary" voltage level of 12,000V to 34,500V. The customer then owns and operates the lines and transformers required to distribute power within the facility and reduce it to secondary voltage where it is used. The rate discount reflects the utility's reduced investment and operating costs, which are now shifted to the customer. Customers must consider both the management and financial impact of this responsibility, but for large loads it is often justified not only by the discount, but also by a reduction in billing demand from combining noncoincident loads of multiple buildings on a single meter. ES