To a public power district, load management means controlling the use of electricity during peak usage periods to help control the costs of purchased power. The peak demand for electricity usually occurs because of common usage patterns.
By reducing demand during the hours of highest use (peak periods of demand) peaking units or other expensive sources of power will not have to be utilized to provide the needed power.
By Spreading power usage over longer periods during the day, maximum use of present power capacity can be used, reducing the need for peaking power or power bought at higher rates from other utilities.
How does load management affect the cost of electricity?
The highest peak demand during the peak month (usually July or August) sets the rate at which your power supplier buys power for the next twelve months, or when a new peak is set. This is known as ratchet. Simply stated, your power supplier pays for power at the rate set by the highest peak demand each month regardless of the amount of power sold. It is very much like minimum bill, only it can add up to thousands of dollars each month and several hundred thousand dollars in a year. These ratchet costs are in turn, billed back to you the consumer.