Auditing a 400-bed hospital in Tulsa on PSO. Their demand charges are insane — $47,000/month just in demand charges on their main meter. They hit a peak demand of 6,200 kW in July and the ratchet clause locked them in at 80% of that peak for the next 11 months. Even in February when actual demand was 3,800 kW they were being billed for 4,960 kW. Is there any way to get relief from a ratchet clause?
Hospital demand charges through the roof
Ratchet clauses are brutal for hospitals because their load profile is so seasonal — AC load in summer pushes demand way up while winter demand is much lower. A few things to check. First, make sure the ratchet percentage is being applied correctly. PSO's ratchet is 60% not 80% on the LP-1 rate. If they're being billed at 80% that's the wrong ratchet factor and you've found a significant error. Second, check if there was an equipment malfunction or one-time event that caused the July spike. If so, the utility may adjust the billing demand. Third, look at whether a time-of-use rate would be more favorable given their load profile.
Derek makes a great point about verifying the ratchet percentage. I've seen utility billing systems apply the wrong ratchet factor more often than you'd think, especially after tariff changes. Also check whether the hospital qualifies for an interruptible rate. Many hospitals have backup generators that technically make them interruptible loads. The discount on an interruptible rate can be substantial for a 6 MW facility. Finally, look at power factor. Hospitals with large imaging equipment like MRI and CT scanners often have poor power factor, and correcting it can reduce demand charges by 10-15%.
You were right — I pulled the PSO tariff and LP-1 ratchet is 60%, not 80%. The hospital has been overbilled on the ratchet for at least two years. This is going to be a massive recovery. Checking the interruptible rate and power factor next. Thank you both.