Suppose a small business can elect to use either the timeofu

Suppose a small business can elect to use either the time-of-use (TOU) rate schedule shown below or the rate structure involving a demand charge.   

A. TOU Rate Schedule

B. Demand Charge Schedule

On Peak

15¢/kWh

Energy Charge

6¢/kWh

Off Peak

7¢/kWh

Demand Charge

$10/mo-kW

During the peak demand period they use 130 kW of power and 35,000 kWh/month, while off-peak they use 35 kW and 10,000 kWh/month. Calculate and compare the two billing options. Which should they choose?

Solution

A) Amount need to pay TOU if considered

     $ C = 0.15*35,000 + 0.07*10,000 = $ 5,950

B) Amount need pay if demand charge is considered

   $ C = 0.06*45,000 + 10*130 = $ 4000

Thus from above we can conclude that money paid to utility will be less if demand charge is consider for calculating tariff .