As part of our continuing series on what drives costs for your local electric cooperative, we’re spotlighting a topic that may be unfamiliar to many: demand billing. While residential members do not have a demand charge on their bill, this component is common for many commercial and industrial members—and it’s important for all members to understand why demand billing exists and how it impacts our cooperative as a whole.
What is Demand Billing?
Unlike the standard residential electric bill, which is based on the total amount of electricity used and is measured in kilowatt-hours (kWh), demand billing includes another element. Demand measures the highest rate at which electricity is consumed during a set period, the peak 15 minutes within a billing cycle. This peak usage, known as demand, is measured in kilowatts (kW).
For businesses, this matters because their equipment and processes often draw large amounts of power in short bursts. For example, a manufacturing facility might use a significant amount of electricity when machinery starts up, or a grocery store may have a sudden spike during refrigeration cycles.
Demand billing ensures that those members who place the greatest strain on the electrical system during peak times help cover the costs of maintaining infrastructure robust enough to meet those peaks.
How Do Residential Members Affect System-Wide Demand?
While the typical household uses less electricity than commercial or industrial members, there are a lot more homes than businesses. About nine out of every 10 Piedmont Electric members is a residential account.
Like businesses, homes also see their energy use fluctuate throughout the day. For example, most members have air conditioning units running on hot summer afternoons, or lights shining and heat warming their home on cold winter mornings.
When tens of thousands of homes have similar energy use patterns, they have a big impact on the co-op’s overall demand.
Why Does Demand Matter to all Members?
Higher demand increases costs for Piedmont Electric. As a not-for-profit, these costs are ultimately passed on to members. Demand billing helps ensure that high-demand members pay their fair share for the higher capacity they require.
Understanding how demand billing works empowers members to manage their energy use more efficiently. Shifting energy use to lower demand times lowers cost for those on demand billing while also helping the cooperative keep costs down which provides savings to all members.
We’re Here to Help
If you have any questions about demand billing or would like help lowering your demand, contact our friendly team at 800.222.3107 or info@pemc.coop for assistance today. Thank you for being a valued member of your local cooperative!