I'm reviewing a Tucson Electric Power bill for a client on Schedule GS-3 and their power factor penalty calculation seems off. The tariff says "Power factor penalty shall apply when the monthly average power factor is less than 90%" but then has this convoluted formula involving kVA billing demand vs kW demand. Client had 0.87 PF and got hit with a $1,850 penalty on 450kW demand. Can someone explain how TEP actually calculates this? The tariff language is clear as mud.
TEP Schedule GS-3 power factor clause - anyone else confused?
Patricia, TEP uses the standard kVA billing method for PF penalties on GS-3. They bill the higher of your actual kW demand or 90% of your kVA demand. So if your client had 450kW and 517kVA (0.87 PF), they'd bill based on 517 × 0.90 = 465kW instead of the actual 450kW. The penalty is essentially the demand charge on those extra 15kW. With TEP's demand charge around $8-9/kW on GS-3, that works out to your $1,850 penalty. Make sense?
Sarah's explanation is spot on. That's exactly how PG&E does it here in California on similar rate schedules. The 90% factor means they want you at 0.90 PF or better, and if you're worse, they inflate your billable demand to what it would be if you were exactly at 0.90. It's actually more forgiving than a straight percentage penalty - some utilities just multiply your bill by a penalty factor.