Question about power factor and demand billing - I have a manufacturing client with terrible power factor (0.72) and I'm trying to understand how this affects their demand charges. The utility bills show both kW and kVA demands. Are they billing based on kW demand or kVA demand? And does the ratchet apply to both?
Power Factor Impact on Demand Charges
It's Georgia Power, Schedule PL-2. The bill shows kW demand of 850 kW but kVA demand of 1,180 kVA. There's a separate line item for "Power Factor Adjustment" that adds about $340 to the monthly demand charges.
So Brian, if they installed power factor correction to get up to 0.95 power factor, they'd be billed on kW demand instead of kVA demand? That would drop their demand charges from 1,180 kW to 850 kW?
Great discussion. Power factor correction can be one of the fastest payback investments for industrial customers with poor power factor. Ian, make sure to calculate the savings based on both demand charge reduction AND elimination of power factor penalties.
Ian, which utility? Most bill demand based on kW but some include power factor penalties that effectively increase the demand charge. What's the rate schedule?
Ian, Georgia Power definitely penalizes poor power factor. They bill the higher of kW demand or kVA demand, and with a 0.72 power factor, your kVA demand will almost always be higher. The ratchet applies to whichever demand they're billing (kVA in this case).
Exactly Ian. At 0.95 power factor, the kVA demand would be much closer to the kW demand, so they'd be billed on kW. Could save thousands per month in demand charges, plus eliminate that power factor penalty.