Utility Rate Structures & Tariffs Flashcards

A hospital's power factor is measured at 0.78 lagging. Its tariff imposes a power factor penalty below 0.90. Which action would most directly eliminate this penalty?

Answer: Adding capacitor banks to supply reactive power locally

Capacitor banks supply reactive (VAR) power locally, raising the power factor toward unity and eliminating the lagging power factor penalty.

Under a net metering tariff, what happens when a customer's renewable generation exceeds their consumption during a billing period?

Answer: The meter runs backward and excess kWh credits are applied to future bills or compensated at a defined rate

Net metering credits excess generation against future consumption or compensates it at a specified rate, though the exact compensation varies by state and utility policy.

What distinguishes a coincident peak demand charge from a non-coincident peak demand charge?

Answer: Coincident peak is based on the customer's demand at the time of the utility's system peak; non-coincident is based on the customer's own monthly peak

Coincident peak demand reflects the customer's load at the moment the entire utility system peaks, directly tying cost to grid stress; non-coincident measures the customer's own highest demand regardless of when it occurs.

A large industrial customer is offered a special contract rate below the published tariff. Under which regulatory condition is this typically permissible?

Answer: When the contract rate still covers the utility's incremental cost of service and is approved by the regulator

Special contracts are permissible when rates cover incremental costs, avoiding cross-subsidization of other customers, and are approved by the relevant regulatory authority.

In a declining block rate structure, a large industrial customer consuming 5,000,000 kWh/month will pay a lower average rate than a small commercial customer consuming 10,000 kWh/month. What is the traditional justification for this design?

Answer: Larger loads spread fixed utility costs over more kWh, reducing per-unit costs

Declining block rates reflect that fixed costs per kWh diminish as consumption rises, so very large customers are served at a lower marginal cost.

What is the key characteristic of a demand subscription tariff (also called a fixed demand or capacity subscription rate)?

Answer: Customers pre-subscribe to a capacity block and pay a fixed fee for that capacity regardless of whether they use it

Demand subscription tariffs charge customers for a reserved capacity block, incentivizing them to stay within that block to avoid overage penalties.

A utility's tariff includes a green pricing premium rider that adds $0.015/kWh to a customer's bill. What does this rider typically fund?

Answer: Purchase of renewable energy certificates (RECs) or renewable generation on behalf of the customer

Green pricing riders fund procurement of renewable energy or RECs so that the subscribing customer can claim a renewable energy supply without installing on-site generation.