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5.2. ERMUSR 11-17-2009
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5.2. ERMUSR 11-17-2009
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11/17/2009
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Elk River -~-, <br />Municipal Utilities <br />13069 Orono Parkway • P.O. Box 430 <br />Elk River, MN 55330-0430 <br />November 12, 2009 <br />To: Elk River Municipal Utilities Commission <br />John Dietz <br />Jerry Gumphrey <br />Daryl Thompson <br />From: Troy Adams <br />Phone: 763.441.2020 <br />Fax: 763.441.8099 <br />Subject: Review and Consider Demand Electric Service Tariff Revision for Low Load Factor <br />Customers. <br />There was discussion during the October commission meeting regarding the possibility of <br />implementing an economic development rate and a low load factor demand customer rate. These <br />two concepts could be completely separate or one in the same. Because of some known low load <br />factor demand customer issues, the following analysis specifically addresses the low load factor <br />customers. Discussion of an economic development rate and/or program will be handled at a <br />future date. <br />The term load factor refers to the ratio of average load to peak load. It's a comparison of the <br />energy used to the maximum energy used if the rate of the peak usage was applied over the entire <br />time being measured. A customer with a high load factor would have a very consistent load over <br />time. For example, a data center that is in operation 24 hours a day and 7 days a week would <br />have a very consistent load and a high load factor. A gravel mine would have a low load factor <br />because the equipment has a very large load, but only runs for short periods of time. <br />Elk River Municipal Utilities Demand Electric Service Tariff applies to customers with demands <br />greater or equal to SOkW for 3 consecutive months. This tariff is enclosed for reference. The <br />demand rate structure charges for energy usage (kWh) and peak demand (kW). The energy <br />usage is the energy usage accumulated over time and the peak demand is a measurement of the <br />peak capacity required during that time. The peak demand is the component that recoups the <br />cost of sizing our distribution systems major components (substations, feeders, transformers, <br />etc...). With a low load factor customer, the capacity required would be high without the energy <br />usage to go along with it. These low load factor customers are often large enough that they can't <br />be classified as a non-demand customer. Because these customers fall into the demand rate <br />class, they pay the demand component of the rate for their contribution to the distribution system <br />sizing. This is the fair and equitable way to charge a customer for their usage. Our residential <br />and non-demand (small commercial) customers all contribute to the system demand to a smaller <br />degree, but this cost is not recouped through a demand component of those rates, rather blended <br />with the energy component. This isn't an absolute fair and equitable way to charge every <br />
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