Understanding Peak Pricing and Purchasing

You may not think you need to have an understanding of energy demand and purchasing, but do you ever look at your energy bill and wonder what it all means? If your answer to that question is “yes,” then you might be interested to learn how demand impacts your utility bill.  

To start, it is important to understand how electricity is made and how it is delivered to your home. Before Hendricks Power can send electricity to your home, that electricity needs to be generated by a Generation and Transmission cooperative (G&T). In this case, Wabash Valley Power Alliance. Once the electricity has been generated, it travels over high-voltage transmission lines to substations, where the voltage is reduced to a safer level. The electricity then travels over distribution power lines and finds its way into your home. So, while you pay your bill to us – your electric distribution cooperative – we don’t actually generate the electricity you use. That is the job of the G&T.  

Hendricks Power helps to determine how much electricity our members need to power their homes and businesses, and you play a big part in determining how much electricity the G&T needs to create to keep the lights on in our community. That is where these terms “consumption” and “demand” come in.

Demand is measured in kilowatts (kW). Consumption is measured in kilowatt hours (kWh).  A light bulb “demands” a certain number of watts – let’s say 100 watts (or 0.1 kW). If that light bulb stays on for 10 hours, it “consumes” 1 kWh.  Now, if you turn on 10, 100-watt light bulbs in your home for one hour, you are still consuming 1 kWh. However, you are demanding the utility to have 1 kW available to you over the course of one hour, instead of 0.1 kW over the course ten hours.  This requires the generation and transmission plant to produce more power in less time to meet your demand.

Hendricks Power purchases kilowatt hours from Wabash Valley based on the average demand of our members. Peak demand refers to the time of day when the demand for electricity is highest. Typically peak demand occurs when families return home from work or school, prepare dinner and use multiple appliances. This is typically during the evening when families return home from work or school and having dinnertime when using the most appliances. Using electricity during this peak demand period often costs more to both Hendricks Power and our members. Demand is the reason your electricity bill fluctuates from season to season and even year to year.

Generating and distributing power can be a tricky and complicated business, but rest assured Hendricks Power will always meet the necessary demand to provide safe, reliable, and affordable electricity to your family.

Hands holding light bulb