ESCO Energy Procurement and Utility Rate Structures

Question 1

On a typical commercial electric bill, the demand charge is based on which value?

Accepted Answer

The highest average kW recorded over one demand interval (often 15 minutes)

Answer

Demand charges bill for the peak rate of use (kW), measured as the highest average load over one demand interval, usually 15 or 30 minutes. Energy charges cover total consumption (kWh).

Question 2

A facility used 360,000 kWh in a 30-day (720-hour) billing period and peaked at 1,000 kW. What is its load factor?

Accepted Answer

50%

Answer

Load factor = average demand ÷ peak demand. Average demand = 360,000 kWh ÷ 720 h = 500 kW. 500 ÷ 1,000 = 50%.

Question 3

What does a demand ratchet clause in a utility tariff do?

Accepted Answer

Sets billing demand to at least a percentage of the highest peak recorded in the previous months (often 11–12)

Answer

A ratchet means one high peak can raise demand charges for months afterward. That makes peak avoidance worth more than a single bill suggests.

Question 4

A utility charges a penalty for low power factor. Which measure fixes it most directly?

Accepted Answer

Installing power factor correction capacitors

Answer

Low power factor comes from inductive loads such as motors drawing reactive power. Capacitors supply that reactive power locally, which cuts kVA demand and the penalty.

Question 5

Under a time-of-use (TOU) rate, which strategy usually saves the most?

Accepted Answer

Moving flexible loads (e.g., thermal storage charging, batch processes) to off-peak hours

Answer

TOU rates price energy by time period, with on-peak kWh costing the most. Moving loads off-peak lowers cost even when total consumption stays the same.

ESCO - Energy Service Company Practice Test

ESCO - Energy Service Company Practice Test

ESCO Energy Procurement and Utility Rate Structures