What is a monthly fee charge?
As a not-for-profit electric company, Cornhusker Public Power District charges only what it costs to keep the lights on for our customers; rates are not marked up to generate profit. The directors and employees watch expenses carefully and are committed to providing electricity at the lowest possible cost.
Customers demand (KW) and energy (kWh) changes from month to month, but the monthly fee charge will stay the same. This charge covers the expenses to purchase, build and maintain power lines, substations and other equipment to ensure power is available at your location, whenever you need it.
The monthly fee needs to collect the true cost of having electric service connected to your home or business.
The costs associated with billing a meter, maintaining the meter, providing customer service, and having all of the infrastructure, maintenance, service technicians, and equipment to ensure power is available (24/7- 365) occurs regardless of whether or not any energy is consumed.
Demand (KW) charge
Distribution demand has always been a large part of the customer’s bill… but not as a line item or specific to each individual customer’s load profile. In the past, the actual demand costs for a rate class were all placed into the bucket and recovered through the energy (kWh) unit. It was paid for by customers in the rate class who consumed energy (kWh), not specific to demand (kW) load profiles.
The new rate structure addresses this as it identifies each customers demand (kW) profile and provides a clear price that recovers the amount of the “bucket” for which each customer is responsible.
Energy portion is reduced
A result of identifying and collecting the true cost of connecting to our distribution electric lines, the “monthly fee”, and introducing a demand (KW) component to recover costs based on individual load profiles, we have the opportunity to allow the energy (kWh) unit price to become simplified and reduced.
Explanation of Demand (kW) and Energy (kWh)
Electricity usage is measured in two ways:
Demand (kW or kilowatts): the rate at which energy is used
Energy (kWh or kilowatt-hours): the amount of energy used
Demand Charge (expressed as “kW” or “kilowatts”): Demand, the rate at which a customer uses electricity during a specified time period, is measured by the highest rate in that billing period.
Energy Charge (expressed as “kWh” or “kilowatt-hours”): Energy charges are based on the amount of electricity a customer uses during the billing period which is expressed as kWh.
Think of it in terms of your car’s speedometer:
Example: Car travels at a rate of speed of 80 mph for ½ hour, the miles driven is only 40 miles.
In terms of electricity:
Customer’s rate of consumption is 80 kW for ½ hour, the kWh consumed is 40 kWh.
Understanding Demand and Consumption
The difference between demand and consumption is vital to your choices in reducing your energy costs. A simple way to see the difference between demand and consumption is by considering two examples.
One 100-watt light bulb burning for 10 hours consumes 1,000 watt-hours or 1 kWh. The entire time it is on, it requires or “demands” 100 watts or 0.1 kW from the utility. That means the utility must have that 0.1 kW ready whenever the customer turns the lamp on.
Similarly, ten 100-watt light bulbs burning for 1 hour consume 1,000 watt-hours or 1 kWh. Note that in both examples, the consumption is 1 kWh, however, look how differently the second situation impacts the utility from a demand perspective. The serving utility must now be prepared to provide ten times as much capacity in response to the “demand” of the 10 light bulbs operating all at once.
If both of these customers are billed for their consumption only, both will get the same bill for 1 kWh of energy. And that is the way most residential customers are billed. But the requirement for the utility to meet this energy requirement is very different. In the second case, the utility has to have 10 times more generating capacity to provide the second customer’s brief high demand for power compared to the first case.
Analogies for Understanding Demand and Consumption
Another way of understanding demand and consumption is with a “filling the bucket” analogy. Suppose you want to fill a 5-gallon bucket with water. You can use an inexpensive hose connection to your sink providing 1 gallon per minute to do it, and it will take 5 minutes. Or you can get to a more expensive large faucet that provides 5 gallons per minute, it will fill in just one minute. The flow rate is the equivalent to demand, and the 5 gallons of water are equivalent to consumption. In this example, filling both buckets has the same “consumption” but very different “demands.”
The same is true of electricity. While you may be able to accomplish the same thing by operating a small wattage appliance for many hours as operating something of higher wattage for just a few, the higher wattage piece of equipment will create a higher demand on the utility. Using our analogy, you are asking for a larger pipe, and that costs more. If time is of the essence, it might be worth having the more expensive high flow rate or wattage. This is why utilities often charge some customers for both demand and consumption. A customer that sets a high demand requires more services from the utility–additional generating plant capacity, and more expense in lines, transformers and substation equipment.
Some people like to use a car analogy to explain and understand how demand and consumption relate. The car’s speedometer is like the demand meter and the odometer is like a consumption meter. Two cars could travel the same 100-mile road, one at 10 miles per hour for 10 hours and the other at 100 miles per hour for 1 hour. It takes a much more capable and expensive engine to power the car at 100 miles per hour than it does to power the one going only 10 miles per hour.