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The demand charge in a tariff recovers chiefly the utility's

  • A.losses in transmission and distribution
  • B.fixed cost of capacity
  • C.cost of the fuel burnt
  • D.cost of meter reading and billing

Answer: B

Generation, transmission and distribution assets must be built for the peak whether or not they are used the rest of the year, and that cost does not vary with the units sold. It is therefore recovered per kilovolt ampere rather than per unit.

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