Basic Components of Electricity 

Demand and Consumption

The amount a customer pays for electricity is based on two factors:

• The first -- demand-- reflects the maximum electrical power required to operate a customer's facility. EPCOR must have the capacity in place to supply power whenever the customer flicks a switch. Therefore, the basic cost of service to customers with a greater capacity is higher. Demand is measured in either kilowatts (kW) or kilovolt amperes (kVA).
• The second -- consumption-- refers to the actual amount of electrical energy used and is measured in kilowatt-hours (kWh).

For example:

* example only. Does not reflect an actual bill calculation.

Factors Influencing Demand

Peak demand refers to the maximum power registered on a customer's demand meter in a stated period, usually one month. This value equals the maximum average load over a 15 minute interval. The demand component of the power bill is designed to reflect the fixed costs of providing sufficient generation, transmission and distribution equipment to meet the customer's historical peak power needs.

Billing demand is the greater of your monthly peak demand or a historical demand peak, commonly called the demand ratchet. The billing demand meter is usually reset annually, in November, however this may vary according to specific rates.

A useful comparison

When discussing the two basic types of costs in electricity pricing - consumption and demand - it may be useful to compare them with the cost of operating a piece of machinery:

Assume you need a 250 horsepower tractor to move a load. The monthly lease payments are fixed costs and can be compared to electrical demand. Once the machine is leased, the lease payments continue even if the machine is idle. In effect, the lease payments have a 100% "demand ratchet."

The fuel, oil and maintenance required to operate the machine are variable costs. They are directly related to the number of hours the machine operates. The hourly operating costs represent electrical consumption.

Power Factor

Although the term "power factor" does not appear on your power bill, it does affect your energy costs. This can be thought of as a measure of "wasted" energy. Whenever power is supplied to an inductive load, such as an electric motor or a transformer, some of that power is used to create a magnetic field necessary to operate the equipment. This "reactive" power is, in effect, wasted as it does not produce any useful work.

When kW = kVA, power factor is 1, and all power is being used to produce useful work. Power used indirectly increases the overall cost of the electricity system, therefore, customers with low power factor face higher costs. Actual charges vary by rate.

Power Factor - a useful analogy

To understand the concept of power factor, it is helpful to think of a pulley system.

When the weight (Load A) is directly in line with the pulley the tension in the line is at a minimum:

When the weight (Load B) is to one side of the pulley, tension in the line increases. The pulley must work harder since the line is pulling not only upward, but sideways. Reactive power in a low power factor electrical load is similar to this sideways force. It is necessary, because physical laws must be satisfied, but it does not move the load upward, therefore does not directly provide useful work.

Improving or correcting power factor can be compared to lining up the weight directly below the pulley. This is accomplished by adding capacitor banks.

Factors Influencing Consumption

Load factor

"Load factor" is another term that does not appear on your utility bill, but does affect electricity costs. Load factor indicates how efficiently the customer is using peak demand.

A high load factor means power usage is relatively constant. Low load factor shows that occasionally a high demand is set. To service that peak, capacity is sitting idle for long periods, thereby imposing higher costs on the system. Electrical rates are designed so that customers with high load factor are charged less overall per kWh.

For Example

Energy Blocks

To encourage the efficient use of installed capacity, electricity rates are structured so the price per kWh above a certain load factor is lower. The actual structure of the price blocks varies by rate.