Demand is a measurement of the maximum amount of power required during any one-hour interval within a billing period, measured in kilowatts (kW). Simply put, energy is the amount of power you consume, while demand measures your impact on our electric distribution system to deliver that power. The more appliances you run at the same time, the more your demand for power increases.
The Demand charge is not a new charge. It has always been embedded in the energy rates. The PUD is separating out the Demand charge from the Energy charge. This will allow the PUD to assign costs that are directly related to demand, and not based on total energy consumption. These are the costs related to maintaining the distribution system.
The customer will still see an Energy charge that is based on the total amount of energy they consume during a billing period. However, the Energy charge will be reduced once the Demand charge is separated out.
The new unbundled rate structure with separate Demand and Energy charges will allow customers to see exactly how much they pay for the energy they actually use (the energy costs from BPA, our power provider), and how much they pay toward the costs that the PUD incurs to deliver and distribute that energy to them.
The Demand charge is a variable charge that covers the costs of maintaining the distribution system, including poles, wires, substations, trucks, and line crews. It is based on the energy demand during a billing period, and is calculated by taking the highest demand recorded in a billing period (in kW) and multiplying it by a demand rate (currently set at $1 per kW).
The more high-energy appliances the customer uses at the same time within a one-hour period, the higher the demand.
For example, if a customer turns on their oven (5kW) and clothes dryer (5kW) and runs both at the same time within an hour for 30 minutes, then their average demand for that time interval would be measured as: ((5kW x 30m) + (5kW x 30m)) / 60m = 5kW. If this is the highest average demand interval recorded in the billing period, then that would be the demand usage for that billing period. The Demand charge would then be calculated as: 5kW x $1 per kW = $5.00.
However, if the customer turns on the oven and runs it for 30 minutes, then turns on the clothes dryer for the next hour and runs it for 30 minutes, the average demand usage would be: (5kW x 30m) / 60m = 2.5kW. If this is the highest average demand interval recorded in the billing period, then that would be the demand usage for that billing period. The Demand charge would then be calculated as: 2.5kW x $1 per kW = $2.50.
The Demand charge enables the PUD to recover the costs of maintaining the distribution system.
A customer who sets a high demand requires more services from the PUD, including additional capacity, which means a higher expense for lines, transformers, substation equipment, etc. The PUD uses the demand reading to determine the maximum energy (or maximum capacity) required by our customers.
This information is used to develop a system that will be able to meet the customer’s highest peak demand. Customers may not be using the PUD system at maximum capacity all the time. However, the PUD is still required to maintain the system so that it is ready to provide service to customers at maximum capacity, at any time of the day.
This is not a rate increase. This change is designed to be revenue neutral. The PUD will not receive additional revenues from this change.
The Demand charge will be unbundled from the Energy charge. When we do this, the Energy charge will also be reduced to compensate for the change.
In the future, the PUD may begin billing all customers for their Demand charge.
Customers currently see a line item on their bill showing their demand for the month. However, there is no cost associated with the demand. The PUD is adding this line item early to help customers monitor their demand. They will then have the ability to modify their usage, if they so choose, before the charge is implemented. This will allow them to see how modifying their usage might impact their demand and the Demand charge.
With the current rate structure, customers who use more energy generally pay disproportionately more for the Demand charge than customers who consume less energy. This is because the Demand charge is embedded into the energy rates. Therefore, when their energy consumption increases, the Demand charge automatically increases, whether or not the customer has a high demand usage.
On the other hand, customers who have lower energy consumption generally pay less for the Demand charge because it is built into the energy rates, even if their demand use is high. In effect, they are paying less than their fair share for using the PUD system.
The new rate structure is designed to be more transparent and equitable. The goal is to ensure that all customers are paying their fair share of using the PUD system, and that the PUD has a way to assign costs that are directly related to demand use, and not based on total energy consumption.
The impact of separating out the Demand charge from the Energy charge will vary from customer to customer. Some customers will see no changes, some will see an increase in their bill, while others will see a decrease. This will all depend on their demand and energy consumption, or in other words, how much energy they use each month, and their usage habits will affect their bill amount. The impact can also fluctuate from month to month based on these factors.
Our Residential Demand Calculator can help you see how it will affect your bill.
No. All billing schedules will remain the same.
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