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
PF

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.