Demand charges in residential electric utility bill

Thread Starter

strantor

Joined Oct 3, 2010
6,774
What do you know about it?
Do you know what demand charges are?
Do you know if they apply to you as a residential consumer?

Here's what I was told by a savvy dude high up in the food chain at my place of employment:
  • For commercial customers, each month the utility captures your "peak demand" - the highest instantaneous power you drew from the grid during any one moment during that month. This is a factor in an equation that determines your per-kWh TDU charges. So if your facility has drawn no more than 80kW at any given time for the first 29 days of a billing period and then on the last day someone starts up (4) 100HP electric motors at the same instant and then turns them all off a minute later, your bill will be dramatically higher than it would have been otherwise. Basically the utility is billing you for the capacity they have made available to you (and that you have availed yourself of), regardless of how often you utilize that capacity.
  • For commercial customers, this charge is spelled out in a much more detailed itemized utility bill than what residential customers receive. He is the one who pays the bills, so he knows exactly how much it costs when operators don't follow startup procedure and put this kind of load on the grid, and that's why the company is having me automate sequential startups of large loads.
  • He says he is "pretty sure" that residential customers are billed the same exact way, but it's all behind the scenes, with an entire spreadsheet of information hiding behind that single line item "TDU Charges."

Here's what I know:

A few years ago I filed for an LLC and I had a shop built on my property around the same time. The shop has its own electric meter. I paid for the shop out of my own personal coffers but I put a sign for my LLC on the door because I thought it would be cute to do so. The first few months of my electric bill for the shop were quite reasonable, but the bill I received after I put my business sign on the door was astronomical. I called the utility company and asked all kinds of questions. I never got any straight answers but what was said led me to conclude that they had determined my shop to be a business rather than a residence and were therefore billing it according to different criteria. I fought them over it but got nowhere. I took the sign off my door and everything. They refused to put my bill back to the way it had been. I gave up after a while and just accepted that it would always be this way going forward. But the next bill wasn't so bad. The one after that was actually in line with what they had been in the past. I assumed they actually listened and modified my account despite telling me that they absolutely wouldn't. That was a few years ago and the bill has remained reasonable this whole time; only that one month where it was several times higher than it should have been.

During that billing cycle, one thing I had been doing in the shop was testing 30HP Rotary Phase converter. One thing I know I tested, was starting it with a step-up transformer connected to its output, and a 15HP 3ph motor connected to the output of the transformer. When I started it, it dimmed the lights in everyone's house on this end of the road. Neighbors asked me about it. I no longer do that, out of courtesy for my neighbors. I have disconnects between each component. Turn on the RPC unloaded, then switch on the transformer, then switch on the loads to the transformer.

Now years later I'm wondering if that one instantaneous massive draw (had to be several hundred amps) is what resulted in the ridiculously high bill. If that was the effect of "demand charges" manifest but I lacked the prerequisite vocabulary to know what the people at the electric utility were trying to say (without actually saying) and it was never about a "business account" vs a "residential account."


Anyone have similar experience or know about this? I tried Googling about demand charges and several utility companies across the country have a one-paragraph blurb page giving the basic definition of "demand charge", but I could not find anywhere where that says which customers are subject to it, to what degree it effects a utility bill, etc. Basically no useful information at all.
 

MrSalts

Joined Apr 2, 2020
2,767
We had a guy with a similar situation as you when we lived on a main road instead of a subdivision/neighborhood. He claimed his second meter in a pole-barn garage was a residential account. However, the utility had a rule that said any residential account drawing over 200amps is billed as a commercial account for the next 24 months - assuming no draws above 200 amps during that time. They also would charge him to install a higher amperage meter if he exceeded a certain draw. He was peeved because the non-negotiated commercial rates were massive. Good luck.
 

ronsimpson

Joined Oct 7, 2019
2,877
Where I live, residential houses pay 1/2 for trash pickup. Does that sound better than companies pay 2x more?
At the dump, if the truck says has a company name on it the price is 2x, so we have one truck without a name on it.
 

WBahn

Joined Mar 31, 2012
29,829
What do you know about it?
Do you know what demand charges are?
Do you know if they apply to you as a residential consumer?

Anyone have similar experience or know about this? I tried Googling about demand charges and several utility companies across the country have a one-paragraph blurb page giving the basic definition of "demand charge", but I could not find anywhere where that says which customers are subject to it, to what degree it effects a utility bill, etc. Basically no useful information at all.
I'm sure the details vary widely from one service provider to another.

I went and looked at our provider -- Mountain View Electric Association -- and it seems like it's spelled out pretty clearly.

They have a number of different service plans, but I think the three that matter the most for this discussion are the Residential, the Small Power, and the Large Power rate sheets.

The Residential is for service up to 50 kVA:

Grid Access per month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34.50
First 1,500 kWh per month, per kWh . . . . . . . . . . . . . . . . . . . . . . $ 0.10828
Over 1,500 kWh per month, per kWh . . . . . . . . . . . . . . . . . . . . . . $ 0.10063

There are no demand charges for this service.
They are explicit that if you want to have both a residence and a business (other than farmsteads) on the same entry point, that it will be billed as commercial.

The Small Power rate schedule is for business with less than 50 kVA of service.

Single Phase Grid Access per month . . . . . . . . . . . . . . . $34.50
Three Phase Grid Access per month . . . . . . . . . . . . . . . $44.50
First 1500 kWh per month per kWh . . . . . . . . . . . . . . . . $ 0.11830
Over 1500 kWh per month per kWh . . . . . . . . . . . . . . . . $ 0.10574

There's an additional charge of $1.50/mo for each kVA of installed capacity above 15 kVA.

The Large Power rate schedule is for customers with at least 25 kVA of service and is the one with the Demand Charge incorporated.

Grid Access per month . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.00
kWh Charges per month per kWh . . . . . . . . . . . . . . . . . . . $ 0.06700
Demand Charge per month per kVA . . . . . . . . . . . . . . . . . $ 11.98

The Demand Charge is pretty clearly defined:
The billing demand will be the maximum 15 minute integrated kVA demand established by
the member during the billing period as indicated or recorded by a demand meter

They also have a more complex minimum billing calculation:

The minimum monthly billing charge will be the greatest of the following charges as
determined for the member in question:
1. The minimum charge specified in the contract for service;
2. A charge of $1.50 per kVA of installed transformer capacity.
3. A charge of $142.50.

The $142.50 works out to be the $105 grid access charge plus the basic 25 kVA of installed service. Above that and your effective charge for grid access goes down until, for 95 kVA and above, you are paying only for the installed capacity (as the minimum).
 

Thread Starter

strantor

Joined Oct 3, 2010
6,774
I'm sure the details vary widely from one service provider to another.

I went and looked at our provider -- Mountain View Electric Association -- and it seems like it's spelled out pretty clearly.

They have a number of different service plans, but I think the three that matter the most for this discussion are the Residential, the Small Power, and the Large Power rate sheets.

The Residential is for service up to 50 kVA:

Grid Access per month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34.50
First 1,500 kWh per month, per kWh . . . . . . . . . . . . . . . . . . . . . . $ 0.10828
Over 1,500 kWh per month, per kWh . . . . . . . . . . . . . . . . . . . . . . $ 0.10063

There are no demand charges for this service.
They are explicit that if you want to have both a residence and a business (other than farmsteads) on the same entry point, that it will be billed as commercial.

The Small Power rate schedule is for business with less than 50 kVA of service.

Single Phase Grid Access per month . . . . . . . . . . . . . . . $34.50
Three Phase Grid Access per month . . . . . . . . . . . . . . . $44.50
First 1500 kWh per month per kWh . . . . . . . . . . . . . . . . $ 0.11830
Over 1500 kWh per month per kWh . . . . . . . . . . . . . . . . $ 0.10574

There's an additional charge of $1.50/mo for each kVA of installed capacity above 15 kVA.

The Large Power rate schedule is for customers with at least 25 kVA of service and is the one with the Demand Charge incorporated.

Grid Access per month . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.00
kWh Charges per month per kWh . . . . . . . . . . . . . . . . . . . $ 0.06700
Demand Charge per month per kVA . . . . . . . . . . . . . . . . . $ 11.98

The Demand Charge is pretty clearly defined:
The billing demand will be the maximum 15 minute integrated kVA demand established by
the member during the billing period as indicated or recorded by a demand meter

They also have a more complex minimum billing calculation:

The minimum monthly billing charge will be the greatest of the following charges as
determined for the member in question:
1. The minimum charge specified in the contract for service;
2. A charge of $1.50 per kVA of installed transformer capacity.
3. A charge of $142.50.

The $142.50 works out to be the $105 grid access charge plus the basic 25 kVA of installed service. Above that and your effective charge for grid access goes down until, for 95 kVA and above, you are paying only for the installed capacity (as the minimum).
I was impressed by transparency with your electric provider spells out the charges. I wasn't able to find such detailed information from either of mine (Gexa, TXU). A bit of reading on my part revealed that I, along with every other Texan, am actually in a bit of unique situation that, having never paid an electric bill outside of TX, I didn't realize was unique (or else I would have mentioned it in the OP).

See, here in Texas we have a "deregulated" ( :D ) electric market. So where you other poor sods stuck outside the breadbasket of freedom that is Texas must submit to the tyranny of a single provider who owns the power lines and has a monopoly on the market, we Texans have the "Power to Choose" ( :D ) our electricity provider. I have 112 providers to "choose" from in my zip code (77534). If I want to be a responsible adult who even cares about the planet, I can even choose to pay a little extra for power that come from renewable sources. They will make sure that the power delivered to my home over the same wires as my less environmentally aware neighbors, comes from the wind farms hundreds of miles away in West TX.

No matter which middle-man I choose though, one company (which we call the "TDU") still owns all the distribution equipment. All power lines, transformers, substations, etc. are owned by Centerpoint, and Centerpoint is who would calculate the "demand charge." The "TDU Charges" I referred to earlier, those are charges which are billed by Centerpoint to my "chosen provider" who re-bills them to me. They would be the same with any provider. It's totally possible (even likely) that the folks I'm talking to when I call my provider have no idea what these charges mean, hence the confusion. Or maybe they do, but don't want to get too deep in discussion about it since they can't control them. I think they probably get a detailed breakdown of charges from Centerpoint, and just copy/paste the bottom line invoice amount into a single line item on my power bill ("TDU charges").
 
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Thread Starter

strantor

Joined Oct 3, 2010
6,774
We had a guy with a similar situation as you when we lived on a main road instead of a subdivision/neighborhood. He claimed his second meter in a pole-barn garage was a residential account. However, the utility had a rule that said any residential account drawing over 200amps is billed as a commercial account for the next 24 months - assuming no draws above 200 amps during that time. They also would charge him to install a higher amperage meter if he exceeded a certain draw. He was peeved because the non-negotiated commercial rates were massive. Good luck.
Thanks. Since these arbitrary rules and limits are not made known to me, I suppose that going on rules and limits made known to others in other places is the best I can do. I will make sure to stay below 200A in hopes that it prevents any further problems.
 

Papabravo

Joined Feb 24, 2006
20,984
I once had a mad friend who opined: "There is something about every system that sucks!". This was with respect to real time operating systems. In the intervening half-century, it seems his sentiment was universal and prescient.
 
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