Consumers can play an important role in the operation of the electricity grid by reducing or shifting their electricity usage during times of Peak Demand.

During these peak hours, customers are able participate in Peak Load Management programs which can both help reduce their electricity supply price and pay them for their energy reduction performance.

1. When Does Peak Demand Occur?

Peak Demand is the hour that an electricity grid experiences its highest electrical demand – typically the hottest hour of the hottest day of the year.  Historically, Peak Demand days have occurred in the heart of summer (June to September), usually on weekdays between the hours of 3 PM and 6PM.

2. What are Peak Demand Charges?

On peak demand days, the electricity grid operator assigns each customer a “tag” based on their facility’s total kilowatt hours used on the peak hour of the peak day of the year. This is often called a “Capacity Tag” (ICAP) or “Peak Load Contribution” (PLC).

Though it is often not line itemed on your bill, you are responsible for paying these capacity costs on your utility bill each month. Depending on your load factor, capacity costs can make up anywhere between 15 to 45% of your overall energy supply costs. In most cases, these costs are bundled into your Fixed supply rate, and covered on the backend by your retail supplier or utility. In some cases, customers choose to pass through their Capacity costs, where they are billed separately as a fixed dollar amount on each bill throughout the course of a capacity planning year – which run from June 1st to May 31st of each year.

3. Lower Your Capacity Tag

By temporarily reducing and shifting your electricity usage, you can lower your capacity tag for the following year – thereby lowering your supply price.  You may also be eligible to participate in Demand Response programs that could help your business earn payments for reducing your electricity consumption during peak periods.

4. Actions to Help Reduce Demand

An energy consultant can help your facility plan for a specific electricity reduction strategy. Reductions in demand may be temporary (e.g. shut down or reduction in plant operations) or permanent – driven by on-site generation or energy efficiency projects.

Temporary reductions may include adjusting non-essential lighting, adjusting building thermostat temperatures, or temporarily shutting down machinery or other non-essential equipment. Some facilities can use backup storage or generators to minimize demand at peak times.