Understanding Demand Charges on Your PG&E Bill

Demand Charges can comprise a big portion of your company's utility bill. Here's how they work:
Visiting clients and reviewing their utility bills had me mystified.  Large businesses on time-of-use electrical bills, such as the A-10 TOU or E-19 TOU schedules, may pay not only for energy use, but also for demand levels.  This can add up to a great deal of money. For one hotel, over 30% of their bill is made up of demand charges. Wow! 

The PG&E website does not have great guide to understanding these charges, at least none that hasyet been found by this wren. Their example shows a winter bill for A-10 tariffs, which does not provide insight into E-19 demand charges. 

After weeks of sleuthing and coming up empty, the right person answered Wren's questions.  Thank you, Ryan Stroupe of the Pacific Energy Center, for helping clear up how demand charges are calculated.    

First, a quick review of billing times:
Peak hours are from 12 p.m. to 6 p.m., Monday to Friday during summer months, from May 1 to October 31, holidays excepted.  There are no peak hours in winter.

Partial peak hours in summer are from 8:30 a.m. to noon and from 6:00 to 9:30 p.m. Mondays to Friday. Winter partial peak hours are 8:30 a.m. to 9:30 p.m.  

Off peak hours are 9:30 p.m. to 8:30 a.m Mondays to Friday, and all day on weekends and holidays, both summer and winter.  

Demand charges are billed during summer and winter months for TOU schedules. The rates vary by time of season.  For E-19 users, demand charges also vary by time of day. During peak hours, the charges might be $11 to $13 per kW, and at partial peak run $3.  E-19 schedules also have a maximum demand charge per kW, from $5.42 in winter to $9 in summer.  You can find the current tariff structure online.
Demand charges are calculated using the highest level of usage during a 15 minute period out of an entire billing cycle. That usage, measured in kW, is then multiplied by the demand charge rate.  

For example, say your company's top rate of electrical consumption is 100 kW during its highest usage any time in a month.  

Thus, if you theoretically used 100 kW during peak hours under the E-19 tariff, the demand charges would be $1,300 for peak, while an A-10 tariff would simply be $1,088 regardless of time of day. The same usage would be just $300 at partial peak for the E-19 customer.  On the E-19 schedule, you would  also see a Maximum Demand that would run approximately $858.  

A bit confusing?  Simply remember:
Demand charges make it desirable to shift electrical usage from peak hours to non-peak hours.  Demand charges also make it wise to reduce power usage during peak hours.    
Demand charges are seen on Page 3 of your commercial PG&E power bill.  

At the bottom of this webpage is a real-life example so you can see exactly what we're talking about.  Just click on the attachment to see it live.  

In this example of an East Bay hotel, from July 2010.  midway down, under TIME OF USE DETAIL, there are two sections, one labeled ENERGY and the other labeled DEMAND.  

If you do the math, you will see that the hotel has $4,030 in energy charges.  The demand charges are another $2,210.  They are broken out like this:
  • $1,120 for max peak
  • $281 for max partial-peak
  • $806 for max demand
As you can see from this hotel example, the maximum level of demand came during partial-peak hours with 94 kW.  In the event maximum demand occurred during the peak hours, the Max Demand quantity would reflect that instead.

Questions?  See your PG&E account manager. That's what they are there for!

Meanwhile, the more ways you find to cut down your usage, the smaller your company's demand charges, and energy costs, will be.  

Jane Jerome,
Jan 5, 2011, 6:59 PM