Understanding Demand Ratchets in ETB
What Is a Demand Ratchet?
A demand ratchet is a crucial component of certain rate schedules that affects how customers are charged for their demand. Demand ratchets are defined by the utility to determine the customer's Billed Demand (see definition below). Typically, ratchets are defined based on the greater of 1) a percentage of the customer's max demand usage in the past 12 months or 2) the max usage in specified season(s) or month(s) or 3) the current billing periods max demand.
Consider the following demand ratchet definition:
The Non-Coincident Demand Charge shall be based on the higher of the Maximum Monthly Demand or 50% of the Maximum Annual Demand.
This means that if your customer's max annual demand is 200 kW, the utility will take 50% of that max (100 kW) and compare it to the current month's max usage and charge the customer based on the higher usage.
For example, let's assume a max annual demand of 200 kW, a max demand of 80 kW in May and a max demand of 105 kW in June.
In May, the customer will be charged for 100 kW (50% of the max annual demand) instead of 80 kW, and in June they will be charged 105 kW (the max monthly demand) since 105 kW is greater than 50% of 200 kW.
Differentiating Billed Demand from Measured Demand:
- Billed Demand: the amount of demand, measured in kilowatts (kW), that the utility charges the customer for in each billing period. The billed demand takes into consideration any demand ratchet the utility has defined.
- Measured Demand: the highest kW interval recorded during a billing period.
Year-One Demand Savings
It's important to know that customers on a rate schedule that includes a demand ratchet may not experience immediate demand savings in the first year. To consider a conservative approach in your analysis, you can either:
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Remove demand savings from year one.
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Utilize our demand throttle inside of ETB Analytics to reduce your demand by a chosen percentage.
Learn more about our demand throttle here.
How Does ETB Know My Customer's Billed Demand?
Our utility rates account for a variety of demand ratchets, but we also rely on the usage data that you provide when creating your Energy Use Profile in ETB Developer. This typically includes monthly bills and interval data. If your customer's rate schedule has a demand ratchet, and the max value the utility uses to obtain the billed demand falls outside of the twelve months of data we have access to, then ETB will calculate the billed demand using the highest demand measurement that occurred in the dataset available to us.
Understanding Your Rate's Impact on Demand Savings:
It's crucial for users to fully understand the demand ratchet associated with their specific rate plan. Understanding how the demand ratchet functions and its potential impact on demand savings will help you make informed decisions in your analysis.