How Demand Patterns Affect Electric Rates
When you’re shopping for commercial electric rates, not every business is the same. Two businesses located on the same street can be paying two very different electric rates. Understanding these differences and how they affect the supply rate is key to lowering your electric bill. Demand patterns play a vital role in the way an energy supplier determines how much a customer will pay for electricity. Managing your business to prevent large fluctuations in demand patterns can have long term benefits on the electric bill.
Demand patterns are the fluctuations of energy usage by a region or even an individual business. Demand patterns vary during on-peak and off-peak hours. During on-peak hours, peak demand will be at its highest. This is when most companies are operating at full capacity. During off-peak hours, demand drops off as most people are sleeping and energy usage is at its lowest. To have a better understanding of how demand patterns are measured, the customer needs to know the difference between a kilowatt-hour (kWh) and a kilowatt (KW).
Kilowatt-hour (kWh) vs. Kilowatt (KW)
To understand the difference between a kWh and a KW you can think of a bucket and a water hose. A KW will be used to measure the water pressure of the water hose while the amount of water in the bucket will be measured by kWhs. The higher the water pressure, the higher the demand or KW. It’s possible to have a high KW demand while having a low energy usage (kWh) during a billing period.
Using the analogy above, you can either fill the bucket quickly halfway using high water pressure or you can fill the bucket to the top slowly using low water pressure. The former will be an example of a situation where a customer has high demand (KW) and low usage (kWh) while the latter will give the customer a low demand and high energy usage.
Demand Patterns and the Electric Bill
Churches are notorious for having very poor demand patterns. Most energy suppliers will refuse to offer electricity rates to churches, or they will charge them a very high premium. Demand patterns among these institutions are poor due to the volatility of energy usage every week. Peak-demand for a church tends to occur on Sundays, then drops off the rest of the week.
Since energy cannot be stored, energy suppliers must generate or buy the power needed to meet real-time demand. A rise in demand usually means higher operating costs and higher prices. These variables will be factored into the price a supplier charges their customers for electricity. This means if a business has a low energy usage (kWhs) but high demand (KW), it might be negatively reflected in the price they pay for electricity.
Having a high demand does not automatically mean a business will pay a premium for the supply rate. Having a high demand that is matched with high energy usage usually means a company will pay a discount for the supply rate. Large industrial users with high demand tend to pay much lower energy prices than small commercial businesses.
If you own or operate a business, then the more consistent your demand is with your overall usage the better chance you will be paying a lower supply rate. For example, a business that operates five days per week with a daily constant demand will most likely be offered a lower supply rate than a business that randomly shuts down its operations during the week.