You are on page 1of 2

Variable example:

Variable block pricing is seen in energy charges for electricity rates. These rates are sometimes referred to as “hours of use”. Variable block sizes are typically defined as a certain number of kilowatt-hours per kilowatt of peak demand.

For example, take the following rate:

The first 200 kWh per kW of peak demand are charged at 7 cents per kWh All remaining kWh are charged at 4 cents per kWh

Calculate the energy charge using the following scenario:

A facility’s monthly peak demand is 550 kW The total energy usage for the month is 160,000 kWh

What is the size of the first block of energy, which is charged at 7 cents per kWh?

Now calculate the energy charge using the scenario above.

What is the size of the first block of energy, which is charged at 7 cents per kWh? Multiply the peak demand times the block size in the rate to find the block size.

550 kW x 200 kWh = 110,000 kWh

Now calculate the energy charge using the scenario above.

Multiply the energy in the first times 7 cents per kWh.

110,000 x \$ .07 = \$7,700

Multiply the remaining kWh times 4 cents per kWh.

50,000 x \$.04 = \$2,000

Add the two together and \$7,700 + \$2,000 = \$ 9,700 energy charge.

\$7,700 + \$2,000 = \$9,700