This special interest group is where customer care professionals share tactics on how utilities are improving interactions with their customers. 

WARNING: SIGN-IN

You need to be a member of Energy Central to access some features and content. Please or register to continue.

Post

Contracted demand needs change - here is a suggestion!

image credit: © Fluffthecat | Dreamstime.com

Companies and institutions pay kW demand and kWh energy. They are always facing changes, on a monthly basis. The most likely ones:

1) The intensity of activities
2) Energy efficiency measures that are incorporated
3) Participation in demand response programs
4) Distributed generation 
5) Changes in energy conversion processes
6) Load shifting to off-peak hours
7) Cost arbitrage with other energy sources

The kWh portion of the bill can be easily managed. Regulated contracts are "pay as you use". Deregulated ones may have a take or pay clause but even so if consumption was below that level, the difference may be sold at the spot market.

The kW portion represents 20% or 30% of the monthly power bill. And it is a very stiff contractual arrangement around the globe. It is almost a fixed cost. Actually it is a comparison between the physical registered demand and the contracted (may be a fixed value in kW or a ratchet). The local utility charges the bigger one. 


And here is the challenge: usually kW billed by the local utility is therefore higher than the physical demand. The difference is an "idle capacity payment". The reverse situation is when the physical demand is higher than the contracted. Then there is a penalty, all according to the regulations.

The preference - and by far - has been setting the contracted demand with a comfortable "safety margin". It is better to pay for an idle demand then a penalty. But, of course this is an additional cost for the energy user!

This contracted demand system is consistent with the utility's investment to connect the client to the grid. 

Here is the  win-win innovation. For the utility and the clients. A kW capacity exchange in a "zero sum game" arrangement, as an internet based service by which the utility clients would have the possibility to exchange their contracted demand differences in a “zero sum game”. Why is it a win-win?

  1. The local utility keep its kW demand revenue unchanged
  2. By exchanging demand differences an idle demand becomes an active one therefore generating more energy sales out of the same total kW contracted demand for the local utility
  3. Its load factor increases - accordingly infrastructure related investments might be postponed
  4. Utility companies assets are “capital intensive” so this concept makes a substantial economical-financial difference
  5. The clients are able to adjust their contracted demands according to their needs reducing their costs (idle demands, penalties for surpassing the contractual maximum)
  6. This concept is applicable universally to industrial and commercial energy users who are billed by kW demand 

This 6 min video is a high-level overview of the capacity exchange concept including the value for both sides:

  • From the utility's prospective by increasing its load factor
  • The value for the utility's customers when they engage in a demand exchange transaction
  • How to make the capacity exchange happen
Rafael Herzberg's picture

Thank Rafael for the Post!

Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.

Discussions

No discussions yet. Start a discussion below.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »