Duke Energy Progress in Raleigh has a tariff threshold at 30 kW. Accounts under 30 kW peak demand qualify for Schedule SGS Small General Service which has NO demand charge. Accounts over 30 kW automatically move to Schedule LGS which has a $12.80 per kW demand charge. I have a small office building client whose peak demand fluctuates between 28-33 kW. In months they exceed 30 kW they get hit with roughly $400 in demand charges. In months they stay under, zero demand charges. The difference between 29 kW and 31 kW is $400.
Demand threshold tariffs ? staying under the line saves huge money
William ? this is the demand charge cliff effect. Many utilities have hard thresholds where crossing even 1 kW triggers an entirely different rate structure. Duke EP is 30 kW. For accounts near the threshold, a simple demand limiter that keeps peak under 30 kW can save thousands annually. A $500 programmable demand controller that sheds one HVAC unit when demand approaches 29 kW would pay for itself in two months.
In Chicago, ComEd has a similar cliff at 100 kW. Accounts under 100 kW are on Watt-Hour Delivery rate with no demand charge. Over 100 kW triggers General Service Demand with $8.50 per kW demand charge. I had a restaurant group with locations fluctuating between 90-110 kW. The locations that stayed under 100 kW saved $10,000+ annually compared to those that exceeded it by a few kilowatts.
Idaho Power has the threshold at 50 kW. Schedule 19 Large General Service kicks in above 50 kW with a full demand charge structure. Schedule 9 Small General Service below 50 kW has no demand component. I actively manage several clients near that threshold. Energy efficiency measures that reduce peak demand from 55 kW to 48 kW dont just save the demand charge on those 55 kW ? they eliminate the demand charge entirely by keeping the account on the no-demand tariff.
The strategic implication is significant. For accounts near a demand threshold, every kW of demand reduction has outsized value. Reducing from 35 kW to 30 kW on Duke EP doesnt just save $64 in demand charges (5 kW x $12.80). It saves $384 because the entire 30 kW demand charge disappears. The marginal value of the last kW of reduction is enormous.
This is exactly the kind of proactive consulting that differentiates a good auditor from a great one. In Birmingham, Alabama Power has the threshold at 500 kW between Rate GSA and Rate LPP. I had a client at 520 kW who spent $35,000 on VFDs specifically to get under 500 kW. The rate structure change saved them $62,000 annually ? $27,000 net after the VFD investment in year one, $62,000 annually thereafter.
Terrences example perfectly illustrates the point. $35,000 capital expenditure for $62,000 annual savings because crossing the demand threshold changes the entire rate structure. Every auditor should identify whether their clients are near a demand threshold and quantify the value of crossing to the lower-cost side. This is demand charge auditing at its most strategic.
Joanne here in Cedar Rapids. Alliant Energy has a 200 kW threshold between their General Service and Large General Service rates. The rate structure changes significantly at that boundary. I have three manufacturing clients between 180-220 kW where managing demand around the 200 kW threshold is the single most valuable audit recommendation ? more valuable than any billing error correction.