Beware of the Dangerous APS “Demand” Charge for Electricity; It Uses Smart Meters

In early 2016, residential customers of Arizona Public Service (APS) in Arizona began hearing about a new mandatory charge based on “demand”. For the past several decades, electrical bills have been based almost solely on energy usage measured in kilowatt-hours. Demand, on the other hand, is measured in kilowatts, usually averaged over a short period of time like 30 or 60 minutes. And demand charges are typically very high, often over $13.00 per kilowatt. For example, a “demand” of five kilowatts, that occurred on only one day during an entire monthly billing cycle, could result in an added charge of $85.00! This could be caused by an ordinary central air conditioner for a typical three-bedroom house in Phoenix during July and August.

Demand charges are possible only because of smart meters, wireless computerized devices that send your data several times per minute to APS. They may be hacked by a terrorist, invade your privacy (are you home?), sicken five percent of the population, and set fire to your house.

Large appliances running at the same time can create a huge demand and a shocking charge of around $150.00 in addition to the regular charge for energy (kilowatt-hours) actually used. Under even the lower winter rates, the demand charge could TRIPLE your electrical bill. (In the summer, the charge could increase your bill by about 75%; e.g., $200 to $350.)

Common large appliances include central air-conditioning, an electrical stove, an electrical clothes dryer, an electrical water heater and anything else that uses a high power heating element. For example, my A/C unit draws over four kilowatts when its compressor is running; my electrical stove has four surface elements, two of which draw three kW and two oven elements, one of which draws over three kW when the element is on; a typical electrical water heater draws four kW then its heating element is on. As you probably know, all of those appliances cycle on and off to maintain a set temperature. But it is not only possible but actually very likely that the on-times of several appliances will overlap, producing a very large power “demand” of sufficient duration to be counted by APS after being averaged over 60 minutes or even as little as 30 minutes. (APS is proposing 60 minutes; the Arizona Salt River Project (SRP) is now using 30 minutes.)

There is little a customer can do to avoid high charges for demand, since a usage error on just one day out of an entire month of 30 days is enough to produce a $150 demand charge. For example, you can be careful to use your clothes dryer only during evenings and on weekends, but a one-day need for afternoon drying can blast your bill into the stratosphere! Similar afternoon dryer usage will not affect the high demand charge either way; one error will “ruin” the entire month!

Wealthy customers have the option of replacing high power electrical appliances with equivalent gas units. If your house is supplied with gas, you can consider purchasing a modest gas stove and a gas water heater for a total of about $1,000. Installation of the stove may be do-it-yourself, but the water heater installation could easily cost over $500. Unfortunately, the success of this substitution depends on your gas company’s never adding a “demand” charge!

APS and other electrical suppliers may suggest installing a “load shedding” system. Hardware cost alone for such a system is beyond most middle-class homeowners, and the installation cost will be prohibitive because you must hire an electrical contractor for the job.

Now for some mathematics. APS defines the “demand” itself as the “average kW supplied during the 60-minute period of maximum use during the customer’s On-Peak hours”.  Recall that demand is measured in kilowatts; the new demand charge is in addition to the (regular) energy charge measured in kilowatt-hours.

For an easy example, assume for simplicity that you draw one kilowatt continuously all day every day for a one “month” billing cycle except for five minutes on one day when I draw ten kilowatts.  What is your “demand” (in kilowatts)? It is 1.75 kW, based on an average over 60 minutes, as follows: ((1 kW x 55 minutes) + (10 kW x 5 minutes)) x (1 hour / 60 minutes) = (55 kW-minutes + 50 kW-minutes) x (1 hour / 60 minutes) = 105/60 kW = 1.75 kW. Note that if you are a customer of the Salt River Project (SRP), your demand would double to 3.50 kW because SRP averages over only 30 minutes.

Here is another example, based on a slight simplification of the performance of an electrical stove. For simplicity, assume that your load is zero for an entire billing cycle except for the following appliance operation, which occurs once a day during the same hour every day.

The entire load is an electrical stove with three elements in use: two surface units at 3.0 kW and one oven element (for simplicity) also at 3.0 kW.  The stove is on for exactly 60 minutes every day, but the three elements are thermostatically controlled and cycle on and off independently of one another.  Each element cycles continuously for the 60 minutes and is on for five minutes and then off for ten minutes.  Is the demand calculable from the foregoing information, or does the demand depend on statistics regarding how the three loads overlap?

The demand is easily calculable, because the overlap, which varies greatly over time, does not matter at all.  Each heating element is on one-third of the time and off two-thirds of the time, and each one goes through four cycles during the 60 minute averaging period. Therefore, each element has an average demand of 1/3 of 3.0 kW or 1.0 kW, so that the total demand is three times that or 3.0 kW, independent of the overlap. (As long as each element goes through the same number of cycles, the foregoing calculation is correct.)

To be fair to APS, I understand that they intend to offer a plan similar to their present ECT-2 in the tariff. It has a high summer demand charge rate ($13.50 per kilowatt) but a lower rate for energy (5.7 cents average per kilowatt-hour instead of 13.4 average cents per kWh). If you have the money to purchase and install a computerized load-shedding system to control your demand and the expertise to maintain it, it is theoretically possible to save money, but you will be entering a gambling casino operated by APS. As with most casinos, the odds are against the gambler!

To avoid bankruptcy, switch to gas or install a load shedder. Better yet, file a motion with the Arizona Corporation Commission (ACC) to “intervene” in APS Docket No. 16-0036 as a ratepayer. There is no charge to participate in ACC proceedings, and you don’t need a lawyer!


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