A small company has an aggregate annual demand of 1500 kW an

A small company has an aggregate annual demand of 1500 kW and uses 300,000 kWh annually. The original rate schedule was $10.00 per kW and $0.04 per kWh. There are also flat fees totaling $800 per month. Consider a new rate schedule with a slightly lower demand charge and slightly higher consumption charge. The new demand rate is $4.00/kW and the new consumption charge is $0.11/kWh. The flat fees are decreased to $400 per month. What is the change in annual electricity costs? (use a negative number to indicate a decrease in costs).

Solution

Solution: Change in annual electricity costs = $7,200

Working:

Budgeted data

= 1,500 kilowatt X 10 + 300,000 kilowatt X 0.4 + 800 X12

= 15,000 + 12,000 +9,600

= 36,600

New data :

= 1,500 X 4 + 3,00,000 X 0.11 + 400X12

= 6,000 + 33,000 + 4,800

= 43,800

Difference = 43,800 - 36,600 = $7,200