As discussed in previous issues of the Newsboy, the demand rate helps more accurately allocate cost based off how individual customers actually use the system. Prior to the new rate structure introduced in April 2019, members who require a much larger electrical system and put more “demand” or strain on the distribution system, were averaged in with members that require a smaller electrical system and utilize the distribution system in a more steady fashion.
To further clarify… A five-gallon bucket needs to be filled with water. Member A needs to fill the bucket in one minute, so his water line must have the capacity (in other words, must be able to supply the demand of five gallons per minute) to fill the five-gallon bucket in one minute.
See the diagram below.
On the other hand, member B is satisfied with filling the bucket in five minutes, so he only needs a water line that has a smaller capacity.
Clearly, member A requires a bigger water line and puts much more demand on the system supplying the water, but both customers only require five gallons of water.
With the old rate structure, the charge for the five gallons of water would be the same for both customers.
Now relating the example back to electrical service: member A’s service has a bigger transformer, meter loop, and lines to supply the electricity. In fact, every component in the electrical distribution system has to be just a little bigger to serve member A, or as in the water analogy, they need a bigger pump, water line, etc. When member A uses their electrical service, they turn everything on at once, as there is a lot of work that needs done and limited time to get it done. So again, referencing the water analogy, they need five gallons per minute.
Member B, on the other hand, can manage their electrical needs or simply does not have as much electrical need. Therefore, member B does not need as big a service: smaller transformer, smaller wire etc.
As your electric cooperative, we are more than happy to provide service to both members. We want to do our best to help each member by only collecting the revenue needed to cover their fair share of costs. Overall, REC’s goal is to keep the rates revenue neutral per rate class.
Many SLV REC members are already familiar with demand components, as they have been included in rates for irrigation and commercial power services for many years.
With roughly 7,500 members, SLV REC is focused on fair and equitable rates while keeping the best interests of all members in mind.