What are the regulations set by utilities for highly inducti

What are the regulations set by utilities for highly inductive loads such as induction motors

Solution

Most utilities base their charges on real power – i.e. demand charges on kW (or real power at peak) and energy charges on kWh consumed (or real power for each hour). Also note that the reactive component of current does not register on a kilowatt-hour or kilowatt meter.  For these reasons, many utilities impose a power factor billing element to recover the costs associated with the total power they are required to deliver to a given customer.

As the power factor drops the system becomes less efficient.  As an example, if real power demand at two plants is the same, but one has a power factor of 0.85 and the other has a power factor of 0.70, the utility must provide 21% more current to the second plant to meet the demand. Without a power factor billing element, the utility would receive no more revenue from the second plant than from the first, even though serving the second plant places a greater cost burden on the utility than does serving the first plant.  From the customer’s point of view, the transformers and cable in the second plant would need 21% more current-carrying capacity, and the utility would need to supply more current to the second plant in real time to provide service.

Thus, as a means of compensation for the burden of supplying extra current, many utilities establish a power factor penalty in their rate schedules, especially for large industrial customers.

Standards

There is no single standard established in the U.S. for power factor of commercial or industrial facilities interconnected to the power grid.  No universally-accepted methodology for determining a minimum or target facility power factor is established based on engineering principles or electric power system operating standards.

Certain utilities establish a minimum power factor as an operational requirement pursuant to their rules and regulations, as approved by regulatory entities (for investor owned utilities and other regulated utilities), city councils (for municipal utilities) or boards of directors (for electric cooperatives).  The theory behind this approach is that a minimum power factor is needed to protect the overall transmission and/or distribution system from disturbances, harmonics or other events originating at the customer facility that might cause the utility’s protective relaying schemes to activate and initiate outages on the grid. However, these minimums are not based on a published standard or other nationally-accepted engineering code.  For the most part, these minimums are established at the discretion of the utility (subject to approval by the appropriate entity).

Alternatives

While there is no standard power factor requirement established for large power facilities, there is a small number of different billing structures typically imposed by electrical utilities for power factor compensation.

One method is for the utility to set a minimum power factor and charge the customer an incremental amount if the customer’s power factor dips below the minimum. A minimum power factor anywhere from 0.80 to 0.95 is typically established. When a customer’s power factor (as determined at the monthly peak by the appropriate metering) drops below the minimum value, the utility adjusts the total billed demand by the ratio of the minimum power factor to the actual power factor.  An alternative is for the utility to adopt a sliding (non-linear) scale, so that the billings are adjusted by a specific scalar depending on the actual power factor; typically the lower the power factor, the higher the escalator and thus the penalty.

Another way some utilities collect a low power factor premium is to charge for kVA (apparent power) rather than kW (real power). This requires different metering technology and may require a modification to off-the-shelf billing systems to accommodate billing units other than kW.  This avoids any estimation of a penalty amount by billing the customer on the apparent power, which includes the effects of the power factor in any event.  However, the metering for this approach may be more costly.

Other utilities employ a balanced methodology using kW billing that provides customers with a credit for high power factor or a penalty for low power factor.  The utility establishes a target power factor; if the actual power factor exceeds that target, a bill credit is provided, and if the actual power factor falls below the target, a penalty is assessed. This approach is sometimes employed with a bandwidth around the target power factor.  While this approach is reasonable and balanced, it is less common; more often than not, utilities assess a penalty for low power factor and forego credit for power factors above the target or minimum established by the utility.   

Generally, utilities impose power factor penalties or apply credits only on their larger commercial and industrial customers.  In theory, all customer classes experience power factors less than unity; however, utilities do not typically address power factor penalty for non-industrial customer classes (particularly residential and small commercial service) for several reasons:

Recommendation

Generally, a utility should put in place a ratemaking structure that allows it to recover the costs associated with variations in power factor.  The most advantageous method is to rely upon kVA billing, so that the variations in power factor are “built-in” to the apparent power value used for billing purposes.  However, this method may be cost prohibitive depending upon the required metering, any necessary changes to the billing systems, and the number of affected customers.  If relying on kW billing is required, methods that establish a baseline or target power factor, and which then scale the billed demand up for poor power factor or down for favorable power factor, are generally encouraged.

Specifically, any utility reviewing its options for power factor charges or credits should assess all of the issues noted in the previous section and consider them all on a comprehensive basis when determining the best approach for that particular utility for a power factor charge or credit for ratemaking purposes.