LCEC - Billing

Billing Information

Demand Charges

View Example Demand Charges on a Bill (pdf)

General Rate Philosophy

Electric Utility rates are designed to maintain a specified return on investment as regulated by the Florida Public Service Commission (FPSC). Additionally, rates must maintain equity among the various ratepayer classes, ensuring that no single customer is subsidized by the utility’s other customers.

Commercial Rates

The two basic types of commercial rates are the non-demand rate and the demand rate. The non-demand rate is much like a residential bill in that it has only an energy charge for the electricity consumed during a billing period plus a customer charge to cover the meter reading and billing costs. The energy charge is indicative of the utility’s cost of producing (or purchasing for resale) a kilowatt-hour (kWh) of energy.

The major components of demand-rate customer’s bills are the energy charge and the demand charge. The energy charge is based on the amount of electricity consumed over the entire billing period. The demand charge is related to the maximum demand for electricity that a customer places on the utility’s system during the customer’s peak use in the billing period. The demand is measured in thousands of watts, or kilowatts (kW).

Demand indicates the total electrical load of the equipment turned on at a facility during the highest fifteen minutes of use in a billing period. At LCEC, the demand charges range from $6.99 to $12.07 per kW, depending on which of the demand rates is applicable (see load factor explanation below). In accordance with rate tariffs on file with the FPSC, when a facility demands twenty or more kW of power at its time of peak use, it becomes a demand rate customer. If they do not exceed that level during the previous twelve months, they are billed on the non-demand rate.

Principal Behind Demand Charges

Demand is measured to determine the amount of the utility’s equipment that is dedicated to serving a specific customer’s peak needs. Imagine a trucking company who has contracted to deliver 30 loads of dirt to a construction site. If he can deliver one load a day, he can meet the contract with one truck. If he must deliver all thirty loads within the same fifteen minutes, he will need thirty trucks. The trucker will have to set his charges depending on the demand on his resources. It would be difficult for the trucker to justify making his customer who buys one load of dirt a month, pay the cost of the thirty trucks he bought to meet the contract with the high peak demand for deliveries. It would be more fair for the customer with the high peak requirement to bear the burden for his need demands.

How to Reduce Demand Charges

If you have done everything you can to reduce your overall energy use to the minimum needed to conduct your business, you may be able to further reduce the size of your bill by reducing peak demand. The key to peak demand reduction is optimal scheduling of electrical equipment use within the facility.

The goal is to reduce the load at any single given time. Of course, some of your equipment is required to run simultaneously. For example, in a restaurant, the water heater and the dishwasher usually run at the same time. It is possible however to minimize their impact if dishwashing can be done in otherwise slack periods during the day, when few of the other pieces of equipment are running. Alternatively, if the restaurant has a large enough hot water storage tank, they may be able to heat water at night for use during the day, thereby avoiding use of the water heater during peak times.

Often, timers can be utilized to give you the control needed to achieve these reductions. However, if your electrical use is high and you have a large number of electrical loads, it may be feasible to install a computerized load control system to coordinate and optimize the operation of your equipment.

Demand Measurement

A conventional demand meter has two sets of dials. One measures use over the entire billing period. The other indicates the highest total of loads that were turned on during any fifteen minutes in the billing period. The demand dial or pointer is moved upscale by the amount of power consumed in successive fifteen-minute periods. The highest amount of use detected during the preceding periods is stored. Once the meter is read at the end of the billing period, the meter is reset for the next month.

Demand Ratchet Clause

Seasonal businesses use most of their energy in only a few months. In other months, the use may be low, but the utility must leave its equipment in place to serve the customer’s maximum load whenever it is needed. Because specific utility equipment is dedicated to serving that load, FPSC guidelines call for customers to bear the costs of service that are unique to serving their demand. For this reason, a charge is assigned to recover the investment in the under-used utility equipment. In this way, the utility’s other customers don’t have to make up the difference in return on that investment. The mechanism for insuring recovery of investment is the demand ratchet. The rates require that billing demand (as compared to the actual demand) for any month will not be less than 70 percent of the peak demand set by the customer during the previous twelve months.

In addition to businesses that operate only during certain seasons, many other commercial customers find themselves affected by the demand ratchet. For instance, electric heat is a large load demand—almost three or four times more than the air conditioner. In Florida, heat is used for relatively short periods, therefore, it usually doesn’t account for a significant amount of kilowatt-hour use. However, it only takes fifteen minutes to set a demand peak, so using heat for a short warm-up period on that one cold day can affect your billing for the rest of the year. The key to avoiding this situation is to ensure you use only the amount of heat necessary to maintain temperature, and not enough to do an instant warm up. In most businesses, there is enough lighting and other internal heat-producing equipment to maintain temperature without using a heater. If you must, the time to use a heater is before you actually open the building, when lighting and other loads have not yet been turned on and the likelihood of setting a demand peak is small. A programmable thermostat or timer can help achieve the control needed.

Load Factor

Load factor is a measure of peak demand versus total kWh energy used during the billing period. The higher the load factor, the less expensive it becomes per kWh for the utility to furnish electricity to a customer. Consider the following example. A month consists of approximately 720 hours. If a business runs a 100 (kW) load for a month, the use would total to 72,000 kWh, and the load factor would be 100%. If a business runs the same load for half of the time, it would have used only 36,000 kWh during the month, and the load factor would be 50%. The utility is able to serve both scenarios with the same investment in distribution equipment. The only change in the utility’s cost is the expense of purchasing kWh as use increases. In effect, the capital costs get spread over more kWh as load factor increases. The LCEC optional high load factor rate (GSD-O) is applicable when the load factor percentage exceeds 63 percent. Under the GSD-O rate, the kWh charge is lower than the general service demand rate but the demand (kW) charge is higher. The rate is designed to encourage and reward consistent use of power as opposed to widely varying peaks and valleys in use. Businesses that operate twenty-four hours a day or seven days a week are most likely to benefit from this rate. Those that operate eight to ten hours a day during a five-day workweek will be better off on the general service-demand (GSD) rate. Those that demand less than twenty kilowatts or use less than 5,000 kWh a month will benefit from the general service non-demand (GS) rate.