How to calculate Demand Charge
1. What Are Demand Charges?
Demand charges reflect the highest rate of electricity consumption (in kilowatts, kW) over a specific interval (e.g., 15 minutes) during the billing cycle. Unlike energy charges (based on total kWh used), demand charges penalize businesses for sudden spikes in power draw, which strain the grid.
2. Key Components of SCE Demand Charge Calculations
A. Measurement of Peak Demand
- Interval: SCE measures the highest 15-minute average kW demand during the billing period.
- Example: If a factory’s power usage peaks at 500 kW for 15 minutes, that becomes the “peak demand” for the month.
- Meter Type: Requires an interval meter (e.g., SmartConnect™ meter) to track usage in 15-minute increments.
B. Rate-Specific Demand Charges
SCE applies demand rates (in $/kW) based on the customer’s rate plan and time-of-use (TOU) period. Common business rate plans include:
| Rate Plan | Demand Charge Structure | Typical Users |
|---|---|---|
| GS-2 | Flat demand rate (e.g., $15–$20/kW) | Medium-sized businesses (e.g., hotels, retail) |
| TOU-8 | Higher demand rates during on-peak hours (e.g., $25/kW from 4–9 PM) | Factories, large offices |
| GS-3 | Tiered rates based on demand thresholds | Large commercial facilities |
C. Time-of-Use (TOU) Adjustments
- On-Peak vs. Off-Peak: For TOU plans (e.g., TOU-8), demand during on-peak hours (e.g., 4–9 PM) is billed at a higher rate than off-peak.
- Example: A 200 kW peak during on-peak hours at $25/kW = $5,000 demand charge vs. $10/kW off-peak = $2,000.
D. Seasonal Variations
- Summer vs. Winter: Demand rates are often higher in summer (June–September) due to air conditioning loads.
- Example: GS-2 summer demand rate = $20/kW vs. winter = $15/kW.
E. Power Factor Adjustments
- Penalty for Low Power Factor: If a business’s power factor (PF) drops below 0.85, SCE inflates the billed demand using:
Billed Demand = Measured Demand (kW) × (0.85 / Actual Power Factor)
- Example: Measured demand = 500 kW, PF = 0.75 → Billed demand =
500 × (0.85 / 0.75) = 566.67 kW. - This increases the demand charge by 13.3%.
3. Step-by-Step Calculation Example
Business Profile: Manufacturing plant on SCE’s TOU-8 rate plan.
- On-Peak Demand Rate: $25/kW (4–9 PM weekdays).
- Off-Peak Demand Rate: $10/kW.
- Peak Demand: 300 kW (15-minute interval during on-peak hours).
- Power Factor: 0.80 (below 0.85 threshold).
Calculation:
- Power Factor Adjustment:
Billed Demand = 300 kW × (0.85 / 0.80) = 318.75 kW
- Demand Charge:
318.75 kW × $25/kW = $7,968.75
Result: The plant pays $7,968.75 in demand charges for the month due to the on-peak spike and power factor penalty.
4. Tools to Track Demand Charges
- SCE’s My Account Portal: Provides 15-minute interval data, peak demand alerts, and historical comparisons.
- Energy Management Systems (EMS): Monitor real-time demand and automate load-shifting.
- Demand Response Programs: Earn credits for reducing usage during grid emergencies (e.g., Base Interruptible Program).
5. Strategies to Reduce Demand Charges
- Load Shifting: Operate heavy machinery during off-peak hours.
- Energy Storage: Use batteries to avoid grid draw during peaks.
- Power Factor Correction: Install capacitors to maintain PF > 0.95.
- Efficiency Upgrades: High-efficiency motors, LED lighting, and HVAC optimization.
6. SCE Rate Plan Demand Charge Examples
| Rate Plan | Demand Charge | Seasonal Adjustments |
|---|---|---|
| GS-2 | $15–$20/kW | Higher in summer |
| TOU-8 | $25/kW (on-peak), $10/kW (off-peak) | Summer on-peak rates apply June–Sept |
| GS-3 | Tiered rates (e.g., $18/kW for first 500 kW, $15/kW above) | Year-round |
Key Takeaways
- Demand charges depend on peak 15-minute usage, rate plan, and power factor.
- TOU plans penalize on-peak demand spikes, while GS plans use flat rates.
- Poor power factor can inflate billed demand by up to 20%.
For exact rates and clauses, review your SCE rate schedule or consult their Business Customer Service at 1-800-655-4555. Proactive demand management can reduce bills by 10–30%.
