What is the “Demand Charge”?
The demand charge is designed to have the larger power using customers (larger commercial and industrial) pay their fair share of the utility’s fixed investment. This includes the production, transmission and distribution capacity required to meet the customer’s maximum requirements. The charge is based on the rate at which electricity is consumed. The more electricity used at any given time, the larger the utility’s investment in generation, transmission and distribution systems has to be. For example, considering two users: A and B; both consume an equal number of kilowatt-hours (kWh) each day. User A consumes electric energy evenly 24 hours a day while user B consumes the same number of kWh rapidly in only eight hours a day. User B’s demand requires the utility to have a generating and distribution capacity three (3) times the capacity required to serve user A. User B is billed for this additional capital investment. The consumer’s actual demand is metered at the average amount of energy consumed in any interval of 15 minutes. The highest demand recorded during a month becomes the actual demand for the month. To be able to produce enough power for all customers, it is critical that the utility knows the power loads of its larger customers because they have a direct impact on the system’s total power requirements. Rate analysts and utility management can more easily predict the power requirements of the smaller power users. Therefore, charges for demand are built into their kWh energy cost instead of being listed separately on the bill.

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1. What to do about a high bill?
2. What is the “Demand Charge”?
3. What is the Miscellaneous Charge on my bill?