The cost of purchasing power during peak hours has risen dramatically over the past few years. Generally, members in our area are all awake and using electricity at the same time: getting ready for work, preparing meals, etc. This means that during certain times of the day, members are using more electricity than at other times. For KEC, those peak times are currently from 6-10 a.m. and 5-9 p.m.
While the cost of purchasing or producing power on our members’ behalf has long hovered between 42-45 cents of every dollar our members pay in rates, the portion attributable to purchasing power during these peak periods (referred to as “demand charges” within the industry) has been steadily rising. Today, these demand costs represent 18% of our total power supply cost. Over the next three years, these demand costs will increase to 22.5%. In the past, demand costs were recovered through the energy use charges within our rates. With the increase in the cost to purchase power during periods of high demand, our rate structure similarly needs to be revised to recover these costs more equitably.