Im based in Little Rock and a lot of my clients are served by Arkansas electric cooperatives and municipal utilities. Many of them have NO ratchet clause which sounds great. But Ive been finding other demand-related billing provisions that function like ratchets even though theyre not called that. Minimum demand charges, facilities charges based on transformer size, and contract demand provisions all create demand charge floors without using the word ratchet.
Co-op and muni utilities with no ratchet ? hidden demand traps anyway
Arthur ? youre absolutely right. In Oklahoma many rural co-ops bill a facilities charge based on the transformer KVA serving the account. A client with a 500 KVA transformer pays a facilities charge of $1,500-2,000 per month regardless of actual demand. If the client is only using 200 kW of the 500 KVA capacity, theyre overpaying. The solution is requesting a transformer downsize but the co-op may resist because they installed the larger unit.
Similar issue in Iowa. Corn Belt Power Cooperative has contract demand provisions where the member signs up for a specific demand level. Billing demand is the GREATER of actual demand or 80% of contract demand. Sound familiar? Its functionally identical to a ratchet but structured as a contractual commitment rather than a tariff provision.
Sharon ? exactly. And the contract demand is often set when the facility is first energized based on the electrical engineers design load estimate. Nobody ever revisits it. Ive found clients paying for 600 kW of contract demand when actual peak demand hasnt exceeded 350 kW in five years. Reducing the contract demand saves them 200 kW of charges every month.
In Mobile, Alabama I work with several accounts on municipal utility service. Mobile Gas and Water has a minimum demand provision of 50% of the highest demand in the previous 12 months. Theyll tell you theres no ratchet clause and theyre technically correct ? its a minimum demand provision. But it produces the same result as a 50% ratchet. Semantics.
Walter here in Wichita. Evergy has simplified their tariff structure to eliminate some of these confusing provisions but the older accounts that were grandfathered in from the pre-merger Westar Energy tariffs still have contract demand provisions that havent been updated in decades. Always check whether the account has legacy tariff provisions that differ from current published tariffs.
Good contributions everyone. Key takeaway: the absence of a named ratchet clause does not mean the absence of demand charge floors. Minimum demand provisions, facilities charges, contract demand, and transformer-based charges all function as demand floors. Auditors need to read beyond the ratchet line item and understand the full demand billing mechanism for each account.
Interesting thread. In Cedar Rapids, Alliant Energy has both a tariff ratchet AND a contract demand provision on some large commercial schedules. The billing demand is the highest of: actual demand, ratcheted demand, or contract demand. Three different floors ? billing demand is always the highest of the three. You have to check all three to find the one thats setting the actual billing demand.