Electric power use is metered in two ways: on maximum kilowatt use during a given time period (i.e., kW demand typically measured in 15-minute intervals) and on total cumulative consumption in kilowatt hours (kWh). A customer’s electric rate is set using a complex process of tracking cost of services and often seeking regulatory approvals.

The general theory is that demand charges reflect the utilities’ fixed costs of providing a given level of power availability to the customer, and energy charges reflect the variable portion of those costs as the customer actually uses that power availability.

Power companies often use a meter that records the power use during either a 15- or 30-minute time window. The average power used during that window is used to calculate the kW demand.

One low-cost method for controlling peak demand charges is a staged start-up: turn on one piece of equipment at a time, create a schedule where the heaviest intensity equipment doesn’t all operate at full capacity simultaneously.

Power Factor (PF) is another measurement of how efficiently electricity is used in a building. Utilities are moving to a pricing structure that intends to “punish” clients with poor or below average Power Factor (PF) and Load Factor (demand) measurements.

In the simplest of terms, power factor is a measure of how effectively electric power is consumed at commercial and industrial facilities. Greater amounts of power that is wasted results in a low power factor. Customers who have a low power factor draw more electric current over an interval of time and have a higher cost to serve.  A low power factor results in greater system losses, and requires the utility to install or purchase additional capacity.

Austin Energy started to report Power Factor on utility invoices as of October of 2011. As part of the Austin Energy rate restructuring approved June 2012 by the City of Austin, the Power Factor Adjustment was increased from 85% to 90% (.85 to .90). Customers with a Power Factor 90% and above are not charged a power factor adjustment.

Austin Energy’s Powersaver™ program currently offers lightning retrofit, motor and variable frequency drive rebates that increase energy efficiency and may help increase power factor.

Load Factor (LF) is a parameter which compares average consumption of electricity against peak demand. Load Factor is indexed on a scale from “0 to 1,” with a Load Factor of “1” being the best, as it implies that the consumer’s demand is constant. The lower the Load Factor the greater the difference is between average consumption and peak demand. Utilities prefer even or constant demand, as it is easier to plan for power production and supply. This is why utilities place a premium on demand charges (kW).

LF = [(Total kWh)/(# Days in Bill Cycle x 24 hrs/day)] x [Peak kW Demand]

A simpler, more intuitive way of looking at Load Factor is to think of it as average demand ÷ peak demand. If the LF is low, one should look for ways to level the electrical usage (i.e., shift energy intensive processes to periods of otherwise low usage). By increasing LF, the impact of monthly demand (kW) charges will be reduced. Peak demand (kW) in a billing period is what Austin Energy utilizes in its demand charge calculations discussed earlier in this section.

If a Load Factor of “1” is achieved, it does not mean that demand charges will not be incurred or that a building is operating efficiently from an energy point of view. For example, if all lights and HVAC systems in a building were left running all the time, a very high LF would be observed. The theoretical ideal Load Factor is a LF close to “1” with the fewest kWh possible consumed.