We would like to help you better understand how charges are determined for your commercial and industrial electric service. When you know how you spend your electricity dollars, you will be able to find ways to use energy more efficiently in your business. As a group, commercial and industrial customers vary widely in their patterns of electricity use. The corner grocery store, the local high school and the large lumber mill all have different needs.

Here is an example of how a customer's electricity costs might break down:

Oregon Rate Schedule 28: This customer used 190 kilowatts of demand and 62,500 kilowatt-hours of energy this month and had an 18 excess kVar this month.

There are several separate components that go into figuring a customer's total costs. These include an energy charge , customer service charge , power charge and power factor charge . We'll go through each charge and explain what they are and how they are calculated.

Electrical energy is measured in kilowatt-hours (kwh). Specifically, one kwh is 1,000 watts used steadily for one hour - a measurement of the rate of electrical energy used multiplied by the length of time it is used.

The larger the power rating of your electrical equipment (kw) and the longer you use the equipment (hours), the more kilowatt-hours you will consume.

For example, a small 5 kw motor running for 10 hours would use 50 kwh, while a large 50 kw motor operating for only one hour would use 50 kwh.

A kwh meter keeps track of the energy you use in a billing period, which is normally 30 days. The energy charge is designed to recover variable costs. On some tariff or pricing schedules, you could be billed at different prices for different "blocks" of energy. (A "block" of kwh can be thought of as different increments of kwh, such as the first 10,000 kwh, the next 90,000 kwh, etc.)

Even if you use no energy during the month, a minimum charge is imposed to cover some of the costs we incur for "standing by in readiness." The minimum charge is often the same as the basic charge that is designed to recover the distribution and billing-related costs. Besides the basic charge, the minimum charge could also include a charge per kw of demand based on a minimum monthly demand for the schedule. Under certain circumstances, a special minimum charge may be required by contract.

The basic charge is intended to recover the distribution and billing-related costs, which include having an electrical distribution system in place, plus the cost of the meter, servicing and reading the meter, mailing the bills and maintaining customer records.

The basic charge may include a per-kilowatt charge based on the load size. Load size is calculated as the average of the two greatest non-zero monthly demands of the last twelve months (see the definition of demand below). This charge is designed to tailor the basic charge to the size of the customer.

Sometimes called a power charge, demand charge is measured in kilowatts (kw). This is a measurement of capacity or the rate at which you use energy. The monthly demand for which you are billed is based on the 15 minutes during a billing period with the "highest average" kw use.

Demand charges are designed to collect some of the generation and transmission-related costs necessary to serve a particular group or class of customers. 

Within a customer class, if two customers use the same amount of energy but one has higher demands, the customer with higher demands will see higher bills.

For example, suppose two businesses both use 2,400 kwh per day. One uses energy uniformly during an eight hour day at a constant demand rate of 300 kw (300 kw X 8 hours = 2,400 kwh). The other business operates 24 hours a day at a constant rate of 100 kw (100 kw X 24 hours = 2,400 kwh). Although both businesses use the same amount of energy (2,400 kwh), the first places three times the demand on the electrical system and needs three times the generating capacity and possibly a larger transformer and conductors to meet its demand. 

Through the demand charge, each business pays its share of the utility's investment in generation, transmission and distribution equipment standing by to serve.

How is demand measured?
A demand meter is generally installed by the utility when a customer's monthly demand exceeds 15 kw. Demand is usually averaged over a 15-minute period. This continues all month long as the 15-minute "rolling average" and the highest average demand recorded is retained. The meter reader then reads the demand at the end of the monthly billing period and resets the meter so the whole process can begin again. 

Get more information on adjusting motor start-ups and the impact on demand. 

Reactive power, measured in kilovolt-amperes (kvar), results from inductive loads in your facility. Motors, lighting ballasts and transformers are examples of inductive loads. You are allowed a certain amount of reacitve power each month but may be charged for excess kvar of reactive power. 

If you are paying for reactive power, it may be cost-effective to install capacitors on equipment (usually large motors) to reduce or eliminate this charge. Your individual situation will determine the number and size of capacitors required. Contact us for assistance in determining the appropriate equipment and how it should be installed.

Get more information on adjusting motor start-ups and the impact on demand. Or, review your current rates .