Utility Rate Structures
What the exam expects
Utility tariffs combine energy charges, demand charges, customer charges, riders, and sometimes minimum bills. Understand flat, block, time-of-use, real-time pricing, seasonal rates, demand ratchets, power-factor penalties, and standby charges. Billing demand may be the monthly maximum, a ratcheted percentage of a prior peak, or a contract minimum. Load factor strongly affects the average cost per kWh: a low load factor spreads fixed demand costs over few kWh. Know the difference between kW and kVA and why power factor correction can reduce charges.
Traps
Questions often confuse the current month's peak with billed demand after a ratchet, or compare a blended rate with a marginal rate. Another trap is assuming shifting load always saves money when the new period has a higher demand charge. Watch whether riders apply per kWh or per kW.
Worked example
A customer peaks at 500 kW, but the tariff ratchets billing demand to 80% of the prior 12-month peak of 600 kW, or 480 kW. Since 500 kW exceeds 480 kW, billing demand is 500 kW. At $12/kW, the demand charge is 500 x 12 = $6,000. If the current peak had been 450 kW, billing demand would be 480 kW and the charge $5,760.