Quick definition: Contract demand refers to the maximum amount of electrical power that a consumer agrees to draw from the utility provider, specified in their agreement and measured in kilovolt-amperes (kVA) or kilowatts (kW).
Table of contents
- Understanding contract demand components
- Regulatory framework in India
- Practical implications for businesses
- Cost optimization strategies
- How Neufin can help?
- Related terms
- FAQs
- Additional resources
Understanding contract demand components
Contract demand management involves five crucial aspects that every industrial and commercial consumer must understand:
- Maximum demand calculation: The highest average load measured in kVA/kW during any 15-minute interval
- Penalty mechanisms: Charges imposed for exceeding contracted demand, typically 1.5 to 2 times the normal rate
- Load factor optimization: The ratio between average power and peak power consumption
- Billing determinants: Factors affecting monthly electricity charges
- Seasonal variations: Adjustment of demand based on production cycles
Regulatory framework in India
In India, contract demand is governed by state electricity regulatory commissions. For instance, Maharashtra Electricity Regulatory Commission (MERC) mandates that consumers with connected load above 50 kW must maintain a power factor of 0.95 or higher. Similarly, Tamil Nadu Electricity Regulatory Commission (TNERC) implements specific guidelines for demand revision requests.
Practical implications for businesses
Understanding contract demand implications helps businesses in:
- Cost management through proper demand declaration
- Avoiding penalties through monitoring systems
- Planning expansion with adequate power requirements
- Implementing energy efficiency measures
Cost optimization strategies
Effective contract demand management requires:
- Regular monitoring of maximum demand
- Implementation of power factor correction
- Load scheduling during peak hours
- Periodic review of contracted demand
How Neufin can help?
Neufin helps companies with contract demand in the range of 50kW to 20MW successfully implement and make the switch to renewable energy. We provide the fastest way for companies to buy renewable energy in India. Companies choose Neufin because we provide –
- Guaranteed cost savings – Lower your electricity bills without operational headaches.
- End-to-end execution – From feasibility to power delivery, we handle everything.
- Zero upfront investment options – Easy and flexible financing through Neufin Capital
Related terms
- Maximum demand
- Power factor
- Connected load
- Time of day tariff
Frequently Asked Questions (FAQs)
How often can contract demand be revised?
Most state electricity boards allow revision once or twice per fiscal year, subject to specific conditions and notice periods.
What happens if contract demand is exceeded?
Consumers are charged penalty rates, typically 1.5-2 times the normal tariff for the excess demand drawn.
How is optimal contract demand calculated?
It’s calculated based on historical maximum demand patterns, future growth plans, and seasonal variations in power consumption.
Additional resources
- State electricity regulatory commission websites
- Bureau of Energy Efficiency guidelines
- Energy conservation building codes
Last updated: January 2024
Disclaimer: Information provided is for general understanding and may vary by state regulations.
