Demand Charges: Pathway or Detour?
Studies show that creative rate design can achieve up to a 35 percent reduction in customer usage during critical peak hours, and up to a 15 percent difference in total consumption over the course of a year. Demand charges have been a part of electric rate design for large commercial and industrial customers for many years. With the advent of smart meters and more granular usage data, many utilities are now considering applying demand charges to residential and small commercial customers. In a webinar held on December 10, 2015, rate design experts Jim Lazar of RAP and Sean Swe of Burbank Water and Power provided an overview of demand charges and discussed alternative rate designs aimed at recovering system capacity costs, such as time-varying usage charges or hourly demand charges. They also compare the efficiency and equity of demand charges to other methods of recovering distribution costs from smaller consumers.