Care Is Needed In Economic Analysis Of Energy Upgrades As Electric Rates Change

“Utilities charge for peak demand to cover fixed costs related to capacity they must build and maintain to generate, transmit, and distribute electricity, regardless of how many kWhs are actually used. In many areas, 20 percent or more of such capacity is used less than 100 hours a year, typically when it’s hottest outside. During the rest of the year, much of it is in standby mode, but must nevertheless be ready to serve on very short notice. How to charge for those costs varies among the thousands of U.S. utilities. Many levy a fee based on a customer’s peak kW seen each month multiplied by a regulated $/kW rate that may vary seasonally. We call that a “peak demand charge.”–By Lindsay Audin 

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