Effect of Width of Maximum Demand on Rate Making

by

LOUIS A. FERGUSON

Presented before

Association of Edison Illuminating Companies

September 1911

(Reprinted from Proceedings Association of Edison Illuminating Companies, September 1911, pp. 159–165)

Effect of Width of Maximum Demand on

Introduction

Rate Making

BY LOUIS A. FERGUSON

1911

The possibility of the large prospective consumer installing his own isolated plant does not seem to completely down, and it is, therefore, highly important that schedules for the supply of large business should be carefully prepared to meet competitive conditions which are being continually presented. These schedules should take into consideration the hour's use or load factor of the business, as most of us appreciate, otherwise the Central Station will obtain the unprofitable short-hour business and lose that most to be desired long-hour profitable business.

The wholesale rate schedule should differentiate as to quantity, load factor, power factor where practicable, and even as to the kind of supply, whether alternating or direct current or whether high or low tension, and because of the comparatively small number of such consumers and their large size, it is permissible that the schedule be somewhat more complicated than the retail schedule.

This paper will deal more particularly with the subject of the proper method of measuring the maximum demand from which the load factor of these larger or wholesale consumers is determined.

Load Factor

Until very recently there has been much confusion in regard to the term "Load Factor." Even today, after years of discussion, and with a fairly good general understanding of the authoritative definition of load factor there is still much uncertainty unless explanatory statements are added. Load factor is based on two quantities: (a) The average kilowatt hours per hour consumed or generated in a given number of consecutive hours, as, for instance, in a 10-hour day, a 24-hour day, a month or a year; and (b) the maximum demand during the corresponding period.

It is now more generally appreciated that in rate making at least the yearly load factor is the only proper one to consider be

cause fixed charges on investment are usually the most important items of cost and these fixed charges continue every hour in the entire year. The yearly load factor is for this reason coming into general use and in the absence of any qualifying statement the yearly load factor would be understood.

Methods of Determining Maximum Demand

The exact meaning of maximum demand or the second quantity, (b), would not be generally understood if not specified, especially in connection with the sale of alternating current energy. As pointed out at last year's convention by Mr. R. S. Hale in his paper on "Measuring Demand," several methods are in use for determining the maximum demand. These are: First, The so-called "noninstrumental methods," which should apply to all small lighting consumers; and, second, the "instrumental methods" which should be applied to all large consumers.

Small consumers in this statement refer to those having a maximum demand not exceeding one or possibly two kilowatts and which, therefore, include 95 per cent or more of the residential consumers in a large city. Large consumers in the foregoing statement refer to those having a maximum demand in excess of 30 or 40 kilowatts. In the latter case, the actual demand is by far the most important factor in the cost of supplying such consumer and must, therefore, be determined accurately and continuously.

The principal methods are as follows: (1) The momentary swings of an indicating or graphic recording instrument; (2) the current required to produce a given heating effect, as in a Wright demand indicator; (3) the watt-hour consumption or integrated demand during a specified interval of time, as one minute, five minutes, fifteen minutes, half hour or one hour. The last mentioned method is now being used almost exclusively in the measurement of alternating current energy, but there is still a great divergence of practice as to the interval of time and also as to whether the maximum demand charge is based on the highest individual peak or on an average of several peaks, and if so, how many.

This is extremely unfortunate and often puts the Central Station Company at a disadvantage, especially when dealing with large consumers or allied industries who operate in several cities and in which cities the prevailing practice as to interval taken in deter