If you are on a demand rate, your electric bill not only includes a Customer Charge and Energy Charge, but it also includes a Demand Charge, which is a charge for an electrical "demand" that occurs during each monthly billing cycle. This charge is designed to cover part of the actual costs of providing electricity to your home.
Electric demand is measured in kilowatts (kW). It is a measure of the period during the month when the greatest amount of power was required. Another way to think about it is the point in the month when the greatest number of electrical appliances and other loads operated at one time.
Alaska Electric Light & Power meters measure demand by identifying the 15-minute window during which the greatest amount of energy was consumed, as shown in this example. Assume the peak energy consumption for a home over 15 minutes during a billing period is 5 kilowatt-hours (kWh). To calculate the average power (demand) over that 15 minutes, we use the following formula:
5 kilowatt-hours = 5 kilowatt-hours x 4 = 20 kilowatts
¼ hours 1 hours
In this example, the home’s peak demand was a period when the average power consumption was 20 kW over 15 minutes. This could’ve been caused by exactly 20 kW of load operating for 15 minutes or more, or it could’ve been 10 kW for 7.5 minutes followed by 30 kW for 7.5 minutes, followed by 10 kW or less for 7.5 minutes. Because the demand peak records the highest average power over 15 minutes, the instantaneous peak power might be higher than the billed demand peak.
Just like our cars are most efficient and cheapest to operate when we drive at a reasonable and steady pace on a flat highway, using electricity at a steady rate means AEL&P can provide that electricity at a lower cost. For that reason, if you have good energy consumption habits in your home or business, a demand rate may allow you to save money.
However, the total demand charge may be high relative to your energy consumption if a large quantity of electricity is demanded for only a short period of time. This happens if you use many different electrical appliances at the same time and only for short bursts. When you do this, you're asking us to ensure we have expensive infrastructure in place to accommodate an infrequent need.
Imagine you work next door to a grocery store and drive to work each day in a Nissan Leaf. The cheapest way to get a large volume of groceries to your home would be to take many small loads in the Leaf throughout the month. It would be more expensive to buy a pickup truck simply because you prefer to transport all your groceries in one trip.
If you are curious about AEL&P’s demand rates, including our Residential Heat Pump rate schedule, give our energy expert, Lori Sowa, a call at 463.6303.