Understanding Your Electricity Charges

We'd like to help you better understand how charges are determined for your commercial and industrial electric service. This can help you find ways to use energy more efficiently. Click on any question below to learn more; click the question again to "close" it.

How a customer's electricity costs might break down

This chart shows several components that may go into figuring a customer's total electricity costs.

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

What is an energy charge?

Electricity 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.)
What is a minimum charge?

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. 

What is a basic charge?

The basic charge or customer service 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. 
What is a demand charge?

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. Demand represents the greatest amount of energy used in 15-minute intervals during a billing cycle.

To measure demand, electric meters record the average demand usage over each 15-minute period and record the highest (peak) period for the month.

 

   

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.

 

High demand is usually associated with equipment start-up, which requires higher energy use than routine operations. You may be able to adjust motor start-ups to keep your costs down.

 

For more on reducing demand charges, see our Business Solutions Toolkit

 

What is a reactive power charge?

Reactive power, measured in kilovolt-amperes (kvar), results from equipment that draws more current from the electrical system than usual.

Examples of this type of equipment are motors, fluorescent lights and induction furnaces. Because this equipment causes greater electrical draw and has a higher impact on the electrical system, it usually requires larger transformers, wiring and additional generation. Customers that have high demands are charged for this service.
 
 
You can reduce this charge by turning off unused motors and other equipment and by installing capacitors. 

More questions? Please call our Business Solutions team toll free at 1-866-870-3419.

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