Suppose a small business can elect to use either the time-of-use (TOU) rate sche
ID: 1995781 • Letter: S
Question
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?
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
Explanation / Answer
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 .
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