1. Basic Consumption (kWh)

• Definition: The total usage of a resource (electrical energy in kilowatt-hours [kWh], gas in gigajoules [GJ], water in cubic meters [m³]) measured and recorded over the billing period.

• Purpose: To recover the cost of the actual resource supplied. Users pay proportionally to how much they use.

2. Tiered/Block Consumption

• Definition: Rates that increase or decrease based on consumption thresholds within a billing period (e.g., first 1,000 kWh at one rate, above that at a higher rate).

• Purpose: Encourages conservation and helps manage demand. Also supports affordabilit

2. Demand Charges (kW, kVA)

• Definition: A class of determinants based on the rate at which energy is used over a short, defined period (typically 15 or 30 minutes), measured in kilowatts (kW) or kilovolt-amperes (kVA).

• Purpose: Reflects the maximum infrastructure capacity the utility must build and maintain for peak use; ensures customers driving system peaks pay accordingly.

  2.1 Coincident Peak Demand (CPD)

  • Definition: The amount of a customer’s demand measured during the utility’s or ISO’s system-wide peak period (e.g., top 5 highest load intervals of the year).

  • Purpose: Allocates costs to customers whose usage coincides with maximum system-wide stress, supporting fair cost allocation for infrastructure and grid stability.

  2.2 (Non-Coincident) Peak Demand

  • Definition: The customer’s highest recorded demand within a billing cycle, regardless of when it occurs.

  • Purpose: Recovers costs for meeting each customer’s individual peak requirement, supporting accurate system planning.

  2.3 Ratcheting Demand

  • Definition: Demand charges based on a percentage (often 80–100%) of the highest demand measured during the previous 12 months, not just the current period.

  • Purpose: Ensures cost recovery for infrastructure sized for a customer’s highest annual use; discourages one-off demand spikes, encourages proactive demand management

2.4 Seasonal Demand Rates

Definition: Pricing that changes by season, typically reflecting higher or lower demand and costs in different weather periods.

• Purpose: Accounts for cost differences in serving customers during high- or low-demand times of year.

3. Power Factor

• Definition: The ratio of real power (kW) to apparent power (kVA), usually expressed as a percentage. It measures how effectively electrical power is being converted into useful work.

• Purpose: Poor power factor requires more infrastructure and increases losses. Charges or penalties encourage customers to improve efficiency and reduce stress on the grid.

4. Time-of-Use (TOU)

• Definition: A rate structure that varies the price of electricity or another utility based on the time of day or week when it is consumed (e.g., peak, shoulder, off-peak).

• Purpose: Encourages users to shift consumption to lower-demand periods, improving grid efficiency and reducing the need for peaking resources.

5. Fixed Charges/Service Fees

• Definition: Flat, recurring charges on a bill regardless of usage; may cover account administration, metering, or minimum system costs.

• Purpose: Recovers the utility’s fixed operating costs that are present whether or not the customer consumes resources.

6. Capacity Charges / Capacity Pricing

• Definition: Charges associated with maintaining enough generation or delivery capacity to meet customers’ possible maximum needs; sometimes based on utility or ISO-level capacity market prices.

• Pirpose: Compensates providers for investing in capacity and ensuring reliability.

7. Real-Time Pricing (RTP) / Dynamic Pricing

• Definition: Rate structure where prices fluctuate hourly or sub-hourly based on wholesale market prices or grid conditions.

• Purpose: Sends accurate price signals to customers, encouraging them to adjust usage in real time and helping to balance the grid.

8. Market Price Components

• Definition: Bill elements that directly pass through charges from wholesale energy markets—such as energy, capacity, or ancillary service prices.

• Purpose: Reflects actual costs incurred by utilities or retailers, exposing customers to the true cost of supply.

9. Distribution and Transmission Charges

• Definition: Charges for the use of the utility’s infrastructure—wires, poles, substations—needed to deliver energy from generation sources to end-users.

• Purpose: Recovers the significant costs of building, maintaining, and operating the energy delivery network.

10. Ancillary Service Charges

• Definition: Costs for specialized grid support services like frequency regulation, spinning reserves, and voltage control.

• Purpose: Ensures the reliability and quality of supply through critical system support services.

11. Minimum Bill / Minimum Demand

• Definition: The minimum amount billed each period, regardless of usage level. Minimum demand is the least amount of demand for which a customer will be charged.

• Purpose: Ensures the utility recovers baseline revenue from all customers to support fixed infrastructure costs.