# Manage your peak demand of electricity.

Last month's Mushroom News article "Deregulation of Electricity Generation in Pennsylvania--It's Coming Soon" stated "Your most important activity to get lower prices for electricity is to manage your peak demand. An indicator of how well you are managing peak demand is the Load Factor."

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Cost for electricity is not a flat fee per kWh (kilo-Watt-hour) even when the billing algorithm is constant. Your cost per kWh of electricity is significantly Influenced by your peak demand for the billing period. Peak demand - measured as kW (kilo-watt) - is the highest average usage of electricity for a 30-minute interval throughout the billing period. This definition applies to customers in PECO service territory. A high peak demand will always result in a high price for all the electricity used throughout the billing period. Depending on the circumstances, the high peak demand may also increase the price for electricity for eight months following the occurrence of the peak demand. For those customers with designated on-peak hours and off-peak hours (Night Service Rider for PECO customers), the billing demand will be based on the peak demand only during the on-peak hours throughout each billing period.

Managing your peak demand involves smoothing out your profile of electricity usage throughout a billing period to avoid an excessive peak demand. Load factor is a simple, reliable index of how well (or how poorly) the peak demand is being managed. Load factor is defined as:

LF = kWh Consumed x 100% / (kW Demand x Days in Billing Period x 24)

Let's suppose your electricity consumption for a certain billing period was 309,500 kWh and the peak demand was 678 kW. The length of the billing period was 32 days. Your load factor for that billing period is 59.4 percent, based on the calculation:

309,500 kWh x 100%/(678 kW x 32 days x 24 hours per day) = 59.4%

Under realistic conditions, the highest load factor that can be achieved consistently on most mushroom farms (without any supplemental on-site generation) is about 80 percent, which is considered to be excellent. If load factor dips below 50 percent, there should be a review of the operation to analyze why the load factor is low and to consider various approaches to remedy the situation.

To understand how the price of electricity on a commercial or industrial tariff is influenced by the peak demand during the billing period, consider the example of a consumption of 403,200 kWh of electricity for the month of August 2009 on the PECO GS (General Services) tariff. Figure 1 presents the cost of electricity per kWh as a function of load factor. To get the lower prices for electricity, you must manage your peak demand to achieve a high load factor. Each component cost of the electricity (generation, transition, distribution and transmission) decreases as the load factor increases as shown in Figure 2. The only exception is the monthly service charge which is a nominal fixed fee and is not influenced by the load factor. The patterns shown in Figures 1 and 2 for the GS tariff are just as dramatic with PECO's PD (Primary Distribution) and HT (High Tension) tariffs as well.

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It is important to know when the peak demand is occurring in each billing period and what equipment was operating at the time. With such records, you can develop an effective demand management program to reduce electricity expenses without necessarily reducing electricity consumption. For those utility companies offering time-of-day usage rates, it is critically important to record when the electricity is being used throughout each day so that at least some of the energy-intensive activities can be shifted to the off-peak period when consistent with the production schedules.

To manage demand, the patterns of energy usage must be monitored and recorded on an hour-by-hour basis, better yet on a half-hour-by-half-hour basis. It is only after the continuous use of electricity is evaluated that one can begin to develop a management scheme to spread out the demand to avoid the costly peaks. To obtain a continuous archived record of electricity usage patterns for your account, you must have an AMR (Advanced Meter Reading) system or "smart" meter. PECO has already made the transition to the smart meters for most of the commercial and industrial customers. Then you need to subscribe to PECO Evaluator (or a similar electronic management tool) to access your data that you will use to evaluate the effects of management practices on electricity expenses. Consequently, you will be able to establish a smoother load profile, resulting in lower electricity bills. If your electricity consumption can be reduced in tandem with reducing peak demand, then the savings will be even greater.

To summarize, you obviously do not want to pay more for your electricity than you need to. Therefore, you need to manage your peak demand for a higher load factor that will result in a lower price that you are charged for electricity. Follow the steps listed below for a sure-fire way to increase your load factor.

* Determine when the peak demand is occurring for each account

* Stagger large loads during periods when peak demand is likely to be reached

* Shift as many loads to off-peak periods as possible

* Use high efficiency equipment (pumps, fans, HVAC, lights, etc.)

* Use on-site generators to shave demand peaks

But don't be "penny wise and pound foolish." You need to remember that your objective with a demand management program is to increase your profitability and net cash flow by using the electricity in a most efficient manner. Yes, you could save some electricity expense if you cut way back on your ventilation rates, but it will likely result in dramatic reductions in mushroom production and an increase in disease outbreaks. The money saved by reducing electricity consumption in this case will be miniscule compared to the money you lose because of production and disease problems.

Any progress you make in increasing your load factor will be seen in your utility bills between now and Dec. 31, 2010 when the deregulation of electricity generation is completed. When you start shopping for an electricity supplier between now and then, your account with a high load factor will be more attractive to suppliers of electricity. Consequently, you should receive quotes for lower priced electricity for the generated electricity that you will buy from the licensed supplier that you select.

Dennis E. Buffington Professor

Dept. of Agricultural & Biological Engineering Penn State University

dbuffington@psu.edu