Working on an MLGW account (Memphis Light Gas & Water) and trying to understand their demand billing structure. Customer has a 500 kW contract demand but hit 680 kW peak in June. The July bill shows demand charges based on 680 kW, so it appears they use actual demand vs contract demand, whichever is higher. But is this ratcheted forward or just month-to-month? The rate schedule GSA-1 is not entirely clear to me.
MLGW Summer Demand - Ratchet or Contract?
Ray, MLGW definitely uses ratchet provisions on GSA-1. That 680 kW peak will carry forward for 12 months or until they exceed it. Pretty standard setup for municipal utilities in Tennessee.
Thanks Gary. That's what I suspected but wanted to confirm. The customer is planning some energy efficiency upgrades and wants to know if reducing their summer load will help with demand charges. Sounds like they'll need to wait until June 2021 for the ratchet to reset.
Ray, they might want to consider demand response strategies instead of just energy efficiency. If they can shave peaks during high-demand periods, they could establish a new lower ratchet baseline sooner than waiting for the old one to expire.
Good point Thomas. They're looking at load shifting for some of their manufacturing processes. The 680 kW peak happened during a particularly hot day when both production and cooling loads were maxed out.
I've worked with several MLGW accounts and they're usually pretty reasonable about adjusting contract demands if customers can demonstrate sustained load reductions. Might be worth a conversation with their commercial account rep.
Walt, that's interesting. I'll suggest the customer reach out to MLGW about a contract demand reduction. If they can get it lowered to something closer to their typical usage pattern, it might save money even with the current ratchet in place.
Keep us posted on how that goes Ray. Contract demand adjustments can be tricky but MLGW has been pretty cooperative in my experience, especially if the customer has a good payment history.