Manufacturing client in suburban Chicago, ComEd commercial account. They invested $180,000 in VFDs on their air handling units and compressors last year to reduce peak demand. Connected load dropped measurably. But three billing cycles later the demand charges are actually HIGHER than before the VFD installation. Client is furious. What am I missing here?
Why demand charges keep increasing even after load reduction
Marcus ? first check whether ComEd is billing on actual demand or ratcheted demand. Most ComEd commercial tariffs have an 80% ratchet clause that sets your minimum billable demand at 80% of your highest peak in the previous 11 months. If your client hit a spike before the VFDs went in, that spike is still setting the floor.
Robert is right. Pull last 12 months of bills and find the single highest demand reading. That peak times 0.80 is the ratcheted minimum. The VFDs might be working perfectly but billing wont reflect it until the old peak rolls off the 11-month lookback. See this constantly with Evergy accounts in Kansas City.
Found it. Client hit 892 kW in July during a heatwave before the VFDs. 80% of 892 is 713.6 kW. Actual measured demand since VFD install runs 640-670 kW but theyre still billed at 713.6. The ratchet is masking the real savings.
Same thing at a steel fabrication shop in Birmingham. Alabama Power has a similar ratchet ? 60% on their Rate FPL tariff. Client spent $95,000 on power factor correction capacitors and couldnt understand why bills barely moved. Had to explain the ratchet was holding the floor for months after the improvement.
This is why I always check the ratchet clause BEFORE recommending capital improvements. If theyre about to roll off a high peak naturally in a few months, sometimes it makes sense to wait. CPS Energy in San Antonio uses a 75% ratchet on their large commercial tariff.
Marcus ? tell the client the savings ARE real, they just wont show on the bill until the old peak rolls off. Calculate projected savings for months 12-24 and show them. The investment will pay off, just on a delayed timeline. Saved that client relationship twice with a spreadsheet showing the future impact.
This thread highlights one of the most common demand charge traps. The ratchet clause protects utility revenue during periods of declining demand. Marcus, Roberts advice about projecting months 12-24 savings is the right approach. Document the actual kW reduction, calculate what billing will look like once the peak rolls off, and present that as verified future savings.