How Much of Your Bill Is the Demand Charge?
Calculate your demand-charge cost from peak billed demand, the demand rate and the number of billing periods. Then compare it with your total electricity spending.
What is a demand charge?
A demand charge is a billing component linked to measured electrical demand rather than total energy consumption. It is commonly expressed using a rate per kW of billed demand, although actual tariff structures vary.
Why demand charges can be large
A site can use a moderate amount of monthly energy while still creating a high peak demand. Equipment starting simultaneously can raise the billing peak without creating a proportionally large increase in monthly kWh.
Demand reduction is a different problem from energy efficiency
Reducing total kWh does not necessarily eliminate a short peak. Load scheduling, controls, battery storage and operational changes may be more relevant when demand charges dominate.
What to inspect on your bill
Look for billed kW, demand rate, measurement interval, seasonal rules and any demand ratchet provisions. These details determine whether a simple calculation accurately represents your tariff.
FAQs
Is demand charge based on kWh?
Usually no. Demand is a power quantity, typically measured in kW under the relevant billing rules.
Can a battery reduce demand charges?
Potentially, if it can reliably reduce the billed peak under the applicable tariff.
Does this include coincident peak demand?
No. That requires the specific tariff's coincident-peak rules.
Can this be used for commercial facilities?
Yes, as a simplified demand-cost analysis.