Kilowatt (kW): A kilowatt is a unit of power equal to 1,000 watts. It measures the amount of power or the rate at which energy is used or produced.
Kilowatt-hour (kWh): A kilowatt-hour is a unit of energy. It measures the amount of energy used or produced in an hour. For instance, a 1 kW heater that runs continuously for 3 hours will use 3 kWh of energy.
To put it simply:
Power (kW) measures how much energy is being used at any given moment. It’s like the amount of water flowing through a hose right now.
Energy (kWh) measures how much power has accumulated over time. It’s like the amount of water in a bucket at the end of an hour.
KEC’s Peak Use Charge is based on the maximum amount of energy that is used during a one-hour interval during our peak hours (6-10 a.m. and 5-9 p.m.).
Imagine you were able to place all the electricity you consume in a day (24 hours) in buckets like water. The amount of water in each bucket represents how much electricity you used each hour.
Over the course of the month, some hourly buckets may have a small amount of water while others are filled quickly during high energy use activities like heating or cooling.
At month’s end, the total volume of energy contained in all of these buckets represents your total electric consumption, measured in kilowatt hours (kWh). Your peak use, on the other hand, is the single fullest orange bucket during our peak hours, measured in kilowatts (kW). That bucket will be used to calculate your peak use charge. For most, there will be no charge for the first 5 kW in the bucket. Anything that’s left will be used to calculate your peak use charge.
R110 and R115 Rate Example
Let’s say your peak use bucket during the month is 7 kW. The first 5 kW are at no cost and the remaining 2 kW are charged at $6 per kW. Your peak use charge for the month would be $12.
It’s important to note that the new rate design and the introduction of the Peak Use Charge is structured to be revenue neutral for KEC, meaning that the total revenue collected from all members across the cooperative remains the same, even though the rate design has changed.
Under the new rate design, the majority of residential members would see a reduction in charges compared to the current rate design. However, those members who use electricity more heavily during peak hours, which contributes to demand costs, will see higher bills. Among these are those members who have high electrical loads, such as baseboard heating, air conditioning, water heating, or electric vehicle chargers, which operate during peak hours.
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.
To ensure our rates remainequitable for all members, the new rate design will introduce a new billing element to theresidential and general service rates which most members are billed under. It will be called “Peak Use Charge” and will be structured such that members have opportunities to control their costs by shifting consumption to times of the day whenless demand is being placed on the cooperative’s electric grid.
