Understanding Your Demand

Demand is how much electricity you are using at one time. It is measured in kilowatts (kW).

For example, if you have ten 100-watt light bulbs on at the same time, your demand would be 1,000 watts, or 1 kW. If you then heat something up in a 1,000-watt microwave while these lights are on, your demand will increase by 1,000 watts to a total of 2,000 watts, or 2 kW.

Electric demand is not the same as electric consumption. Your electric consumption, a measure of how much electricity you use over a given time period, is billed in kilowatt-hours (kWh). If you ran these ten lights for one hour, that would be billed to you as 1 kWh because they consumed 1 kW for one hour.

Why am I Billed for Demand?

It is our job to ensure we generate enough electricity to supply all of our customers at all times. That’s why it’s important for us to know our customers’ demand. We bill for demand to cover the costs required to build and maintain the electric grid, generation facilities, etc.   

Larger customers require more demand than smaller customers so we must measure and bill those customers accordingly. This is because customers with a higher demand require higher fixed costs to serve than those with lower demand. You can relate this to a vehicle’s engine. Smaller, less expensive engines are only capable of reaching certain speeds. If you require higher speeds, you must purchase an engine that can accommodate that demand even if you don’t always need it.

All customers pay for demand. Smaller customers have demand charges built into their rate, whereas customers who require more demand are given a demand meter and their charges appear as a separate line item on their bill.

How am I Billed for Demand?

If you are on a demand rate, this means that you either elected to be billed on that rate or that your monthly demand exceeds 50 kW in any of three months within a consecutive 12-month period. These three months can fall between any 12 months of the year. For example, if your demand exceeded 50 kW in July, that reading would be included as one of the months exceeding the 50 kW threshhold until July of the following year.

The demand meter constantly measures your electricity demand and consumption. During each billing cycle, you are charged for both the amount of electricity you use and for the maximum 30-minute interval of demand during that billing period.

Let’s look at the chart below for an illustrative abbreviated example:

The blue area represents a customer’s ever-changing electric demand over time. We know that electricity consumption is constantly varying from equipment and appliances that turn on and off. If we add up all of the area in blue over the time period for which you are billed, we get the energy, or kWh. The yellow area represents the integrated value for each 30-minute demand interval. As you can see, you are not billed on the absolute peak of electricity usage, but rather the highest interval in that billing period. Based on the graph, we can see that the instantaneous peak is 160 kW. However, the demand that will be billed is 130 kW that occurred during the 2:00-2:30 time period.

What Other Charges are Specific to a Demand Rate?

There are a couple of charges specific to your demand rate:

Ratchet – A ratchet charge is when your billed demand charge is determined by previously billed demand rather than an actual measurement. We use a ratchet amount of 30%, which is much lower than most other neighboring utilities. This means that you will be billed for either your actual measured demand for the month or 30% of the highest billed demand from the previous 11 months, whichever is greater.

Ratchets are used because demand rates cover the fixed costs associated with serving your specific load – in other words, if you’ve used XXX demand at least three times in  a year, we have to be ready for that demand at any time. That capacity has to be there at all times whether you use it that month or not, so we use a ratchet to cover the cost to have that capacity available and ready for when you need it.

Let’s use an example to demonstrate what this means. Say your actual demand for the current month is 10 kW, but your highest billed demand for the preceding 11 months was 100 kW. In this instance you will be billed for 30 kW, which is 30% of the highest recent demand of 100 kW.

Power Factor – Power Factor is the relationship between real power – your demand (kW) – and reactive power (kVAR), or power that is consumed but is not doing any work and is being lost. For example, oversized motors require more power to produce lesser amounts of energy than appropriately sized motors.

Excessive reactive power causes a strain on the electric grid because it ties up useful capacity. As such, there will be a charge when the average power factor drops below 85%.

Power factor is difficult for customers to determine on their own without the information provided by us and their meter readings. There are devices that customers can have installed to improve their power factor that will help reduce or even eliminate this charge. For more information on how to improve your power factor please see our list of Santee Cooper Trade Allies or contact your electrician.

Is a Demand Rate the Best Rate for Me?

In some scenarios, customers can benefit by being on a demand rate. Santee Cooper can help you determine what rate is better for you. If you’d like more information, please call Andy Altman at 843-347-3399 ext. 3066.