Understanding Demand

Learn what demand is, how it shows up on your bill and what you can do to reduce energy costs

By Mandi Hitt

When your monthly electric bill arrives, you probably look for how much you owe without looking at the other information provided. Your monthly bill tells you more than what your electricity costs. It shows the billing date, how much electricity you used and your peak—or highest—demand for electricity (labeled kW on your bill) for the billing period.

So, what is demand? Demand is the rate at which you, the member, use electricity. As more appliances in your home or business run at the same time, your demand for power increases.

Electricity demand varies throughout the day. For example, we typically demand more electricity in the mornings when starting our days, and again in the evenings when we get home and start cooking dinner, running multiple appliances and electronics all at the same time.

Our system must be built to meet these peak demand times, even though, for most of the day, the demand for power is far less.

One kilowatt is equal to 1,000 watts and is a measurement of how much power something needs to run. A kilowatt-hour is the amount of energy something uses over time. Two members can use the same amount of energy (kWh), but not have the same demand (kW). For example, one member might use it slowly (1 kW over the course of an hour), and the other might use it much faster (1 kW in 15 minutes). The first member put 1 kW of demand on our system; the second put 4 kW of demand because they used the energy four times faster.

Imagine filling a bucket with water. You can use an inexpensive hose connection that provides 1 gallon of water per minute to do it, and it takes five minutes. Or you can use a more expensive large faucet that provides 5 gallons per minute, and it fills in just one minute. The flow rate is demand (kW), and the 5 gallons of water in the bucket is the consumption (kWh). Filling both buckets has the same consumption but different demands. Compare this to two members using the same number of kWh but putting different demands on the system.

Raft River Electric calculates demand charges (kW) based on the highest average amount of electricity your household or business uses during a 60-minute block.

Raft River Electric monitors demand (kW) on a continuous basis for 60 minutes. Members are charged for the highest average 60-minute block of use recorded on the meter. This period is often referred to as the member’s “peak demand,” which is the highest 60-minute average interval of power use within the monthly billing cycle. The peak demand charge is based on each member’s maximum average 60-minute usage period on RREC’s distribution system each month. This charge is a per KW cost, based on the corresponding rate.

After the meter is read each month, demand is reset to zero. The meter starts over, recording the highest average 60-minute block for the next billing period.

As more appliances in your home run simultaneously, your demand for power increases. This is why it’s important to limit the simultaneous use of appliances. Some of Raft River Electric’s costs are driven by the need to satisfy members’ highest demands, even if it only occurs once each month. When that maximum use level goes down, so does the cost of providing all our members with safe, reliable service. Reducing peak demand promotes more efficient use of our resources.

Raft River Electric pays higher rates from wholesale power suppliers for the electricity members use during peak demand periods. The good news is there are ways to manage your electricity use, in turn lowering your peak demand.

• Spread out the use of major appliances rather than running them all at the same time.

• Do laundry and other chores that require significant amounts of electricity at different times throughout the day. Consider setting timers to run your dishwasher, clothes dryer, and other appliances. Members who avoid the simultaneous use of electrical appliances will save.

• Contact Raft River Electric to help evaluate ways to improve the energy efficiency of your home or business. Call us at 800-342-7732.

As a member-owned electric cooperative, our goals are simple. We want to provide safe, reliable, cost-effective energy and exceptional member service. We hope by helping members understand the demand component of the rate structure, it helps them use energy wisely. The reality is, when we all use less energy at once, we all save money.

Q&A

Understanding demand can be complicated. Raft River Electric Engineering Manager Richard Hall answers additional questions about the concept of demand.

Why is it important that utilities make the distinction between energy consumption (kWh) and demand (kW) when billing? What are the advantages of these separate charges?

Utilities, such as Raft River Electric, want to be as fair as possible to all members and rate classes (residential, commercial, industrial and irrigation). Members use energy at different rates and times of the day, month and even year. Energy costs also fluctuate depending on the time of day, month and year. With only demand or energy charges, it would be impossible to pass the cost incurred by the utility on to the member fairly. Depending on how they use electric energy, some would win, and some would lose. Separating these charges, along with the System Access Charge (the monthly fixed charge), allows us to make power bills more equitable among all members and their various energy needs and consumption.

What factors typically influence a member’s demand charge? How do demand charges affect a member’s overall electric bill compared to energy consumption?

Anything that creates heat is typically a culprit of pulling a high demand. Some examples of these appliances are ovens, water heaters, furnaces and hot tubs. Using these types of items simultaneously compounds the problem.

Let’s break down the concept of demand charges. They can be a small or large percentage of a member’s bill, depending on how they use energy. For example, if a member turns on a large load for just a few hours in a month, the demand charge would be a very significant part of the bill. This is because there would only be few kWh’s used. But if the load was run for the whole month, the demand charge would be the same as if it was only run for one hour, and the energy (kWh) would be 720 times greater (720 hours in a 30-day month).

Can you provide an example of a scenario in which a member’s demand would be high but their energy consumption remains low, or vice versa?

Let’s take for example the member who burns wood for heat in the winter. They burn wood every day all month, except for the one weekend they leave on vacation. To keep the house from freezing, they turn on the backup furnace. The furnace pulls 20 kW and runs 30 minutes out of each hour, causing a ten demand to register on the meter. In this case, only running the furnace for the weekend will cause the bill to look very lopsided, with the higher percentage of the charges in the form of demand. You might ask how that fairly distributes the costs in that scenario. The electric grid is very expensive to build and maintain. The higher demand required of the electric system, the bigger and more expensive the equipment costs are. One way to recoup the demand on the system costs is to charge a demand fee.

What is the most common misconception you hear about electric bills related to demand and energy consumption?

I commonly get asked by members about their bills with the concern that they were at home less in one month compared to another. Typically, the demand will likely be the same as if they were home the whole month or not because it only takes one hour of use for a demand to be calculated. Sometimes, the demand can be higher on the months they were at home less because when they get home, they turn everything on at once, and using it simultaneously raises the demand. Moderate, consistent use is better than inconsistent use at the same time, as far as demand goes.