1. Power Factor: What Is It and Estimating Its Cost Presented by:Marc Tye, P.E. 2004 APPA Business & Financial Conference September 21, 2004

2. 09142004-91100-297-2 What Is Power Factor Reactive Power (kVAr) Apparent Power (kVA) Real Power (kW) Power Factor can be either lagging (inductive) or leading (capacitive).

3. 09142004-91100-297-3 Why Utilities Charge For Poor Power Factor?  Low P.F. results in increased system variable costs to produce real power  Losses  Fuel Costs  Low P.F. results in increased system fixed costs to transmit/distribute real power  Generators  Conductors  Transformers  Capacitors  Reactive power must be produced or absorbed to maintain transmission voltages within acceptable limits.

4. 09142004-91100-297-4 Santee Cooper Uses Various Methods to Charge for Reactive Power Generation and Transmission Customers  Reactive cost is included in customers’ average embedded rates.  Power factor penalty is charged to customers not maintaining a 90% P.F. Transmission Only Customers  Reactive supply and voltage control is a required ancillary service.  Charge based upon the amount of power the customer is wheeling across the transmission system.

5. 09142004-91100-297-5 Santee Cooper’s Industrial Power Factor Requirement “The Customer’s Excess Reactive Demand for each Billing Month shall be the amount, if any, by which the Customer’s maximum 30-minute integrated reactive demand, in kilovars (kVAr), during such Billing Month exceeds 48.5% of the Customer’s Measured Demand, in kilowatts (kW), for such Billing Month.”  Equivalent to a minimum of 90% power factor by the Customer  Customer can correct to 90% power factor or company will charge for excess reactive demand L-96 Excess Reactive Demand Charge:

6. 09142004-91100-297-6 Industrial Reactive Demand Charge Based on Average Cost of Capacitor Bank 1.Cost of 69kV, 12,000 kVAr Bank Annual Costs: 2.Debt Service 3.O&M 4.Subtotal 5.CIFR 6.Total 7.Annual Cost per kVAr 8.Monthly Cost per kVAr 9.Adjusted for Inflation 10.Adjusted for Losses 11.Rounded $255,678 $ 49,257 $ 3,000 $ 52,257 $ 4,855 $ 57,112 $ 4.76 $ 0.40 $ 0.43 $ 0.448 $ 0.44 (7.5% interest, 7 years) (8.5%) (Line 6 / 12,000) (Line 7 / 12) (2 years @ 4%) (3.65%) / kVAR - mo

7. 09142004-91100-297-7 Power Factor Example 7,000 kVAr 13,892 kVA 12,000 kW Cos = 12,000 13,892 = 86.4%

8. 09142004-91100-297-8 Example of Excess Reactive Demand Charge 1.Measured Demand (kW) 2.Measured Reactive Demand (kVAr) 3.Power Factor 4.Allowed Reactive Demand w/o Charge (kVAr) 5.Excess Reactive Demand (kVAr) 6.Excess Reactive Demand Charge 12,000 7,000 86.4% 5,820 1,180 $519.20

9. 09142004-91100-297-9 Santee Cooper Open Access Transmission Tariff  Reactive supply and voltage control from generation sources service is a required ancillary service.  Ancillary service used to maintain transmission voltage  Rate is based on allocated portion of the cost of exciter and generator for each unit that produces kVAr’s.  Rate also includes allocated portion of the power consumed by the exciter.

10. 09142004-91100-297-10 Reactive Power Cost Summary Generator / Exciter Costs 1.Generator and exciter fixed costs (VAr Related) 2.Production fixed charge rate 3.Generator and exciter costs charged to VArs 4.Fixed O&M charged to VArs 5.Total $6,864,834 12.06% $ 827,899 $ 224,589 $1,052,488 Real Power Output Charged to Exciter 6.Exciter power consumption 7.Exciter energy consumption 8.Total 9.Total reactive support cost 10.Single system coincident peak (kW) 11.Monthly point to point rate ($ / kW.mo) $ 116,361 $ 158,780 $ 275,141 $1,327,629 3,037,000 $ 0.0364

11. 09142004-91100-297-11 Example of Reactive Supply and Voltage Control Charge 1.Measured Point to Point Reservation (MW) 2.Monthly Reactive Supply and Voltage Control Charge (kW) 3.Total Monthly Reactive Supply and Voltage Control Charge 100 $0.0364 $3,640