What is a demand charge?
A demand charge is a line on many commercial electric bills that charges you for your highest short-term power draw in the billing month, measured in kilowatts (kW), on top of the energy you used.
How it works
The utility records your power use in short intervals, commonly 15 minutes. The highest interval of the month becomes your billed demand. You pay a rate per kW for that one number, however briefly it happened.
Worked example
Illustrative numbers, not a real rate: a demand charge of $15 per kW-month and an energy charge of $0.08 per kWh.
| Highest 15-minute average demand in the month | 500 kW |
| Demand charge: 500 kW x $15 | $7,500 |
| Energy: 100,000 kWh x $0.08 | $8,000 |
| Total for these two lines | $15,500 |
| Share that is demand | 48% |
One 15-minute window set nearly half of this illustrative bill.
Frequently asked questions
Do all businesses pay demand charges?
No. They are common on commercial and industrial rate schedules. Many small accounts and homes are billed on energy only. Check your rate schedule.
How long is the demand interval?
It varies by utility. 15 minutes is common, but some use 30 or 60. Your tariff states it.
Where do I find my demand rate?
On your bill or in your utility rate schedule, usually listed in dollars per kW.
Try it on your own numbers
All numbers on this page are illustrative, including the rate. They are not a real utility tariff. Your bill depends on your utility rate schedule; check it before acting. Peak Ledger gives estimates, not a utility bill or an engineering design.