Reaching the Peak: Manage Your “Peak Demand” to Bring Your Energy Costs Under Control
Are you “demanding” your electricity costs to rise?
This might seem like a ridiculous question. Of course you aren’t asking for your costs to rise. However, if you’re business isn’t managing your peak demand, then unfortunately the answer is likely yes. You are “demanding” your costs to rise. One of the frequently asked questions we get here at Bruce Power Direct is around the distribution and transmission charges on your electricity bill and how managing your peak demand can help you reduce your electricity costs.
A distribution and transmission charge primer.
The distribution and transmission charges on your bill are the transport costs for getting your electricity from the
generators to your business. Transmission charges pay for the high voltage transmission lines (the towers that actually look like Transformers) and funds the Independent Electricity System Operator (IESO) who manages the reliability of the electricity grid. Distribution charges pay for the low voltage distribution lines (the wooden hydro poles) that carry your power along the highways to your facility and also compensate your Local Distribution Companies (LDC).
What is “peak demand”?
Peak demand refers to the maximum amount of electricity required to power your business within a hour in a given
month. Your LDC uses your peak demand as a benchmark so that they know how much electricity they must deliver to your business at any given time. For this reason, they use it to calculate your cost of distribution and transmission.
How is peak demand calculated?
Your electricity bill is generally broken out into two costs lines (sometimes transmission is bundled with distribution). However, there are actually three separate fees that you are paying for: the standard transmissioncharges, distribution charges plus a customer fee.
First things first: your peak demand is used to appropriately classify your business in one of the following categories based on your consumption:
- less than 50kW
- 50kW to 499kW
- 500kW to 4,999kW
- 5,000kW and above
Depending on the class you fall into, the price for each of the three charges will be different. Here is how it typically breaks down:
- Distribution prices range from $2/kW to $5/kW
- Transmission prices are generally flatter at $5/kW to $5.50/kW.
- Lastly a fixed fee ranging from $75 to $12,000 is also applied depending on your consumption (no this is not a typo, the spread is really that large).
Just like that, 20% of your bill is calculated from a single hour every month. This means that every kW you can reduce on your peak is going to save you $7 – $10.50/kW.
Take control of your peak demand costs.
Your peak demand is generally labelled “Demand kW” on your monthly electricity bill and is where you can track
volume consumed. This is one of the primary numbers we use in our Bill Verification algorithms and a good starting point to ensure your costs are accurately calculated. However, this line item on your bill will not tell you when your peak demands occurs. Knowing when your peak happens is paramount in helping you manage it and ultimately lower your costs. We use our Bruce Power Saver to dig into a facility’s hourly consumption data and determine when the peak occurs. What we typically uncover is there is one hour, the same hour every day that is consistently higher than the rest of the day. It is usually consistent with the peak demand as indicated on your bill (which is the highest of the high). This is going to help you focus on what is contributing to your peak demand: lights, HVAC, equipment, or even plug load.
I recently did a peak demand analysis with a warehouse manager who was shocked to learn that his peak was occurring between 5:00 pm and 6:00 pm, 30 minutes after their shift ended and the warehouse cleared out. Upon further investigation he was able to determine the problem. The electric forklifts used in the warehouse were plugged in to charge every day at 4:30 pm causing a spike in their consumption. Within a month of our initial conversation timers were installed on the chargers that delayed the charge cycle lowering their peak demand by 20% and lowering their total costs by 4%. In a world with energy costs rising 8 – 10% per year this client just eliminated half of that cost increase.
By installing this simple piece of equipment, the VP in charge of energy at this facility is well on the way to delivering their targeted cost reduction of 5% for the year.