Demand charges are fees based on the highest rate of electricity consumption recorded during a billing period, measured in kilowatts (kW). Unlike energy charges based on total kWh consumed, demand charges reflect the peak load a customer places on the grid. They are most common for commercial and industrial customers. A factory that draws 500 kW for one hour will pay a higher demand charge than one that draws 100 kW consistently, even if total consumption is similar.
Demand Charge
A fee based on the maximum rate of electricity consumption (peak demand in kW) during a billing period.
Related Terms
Peak Demand
The maximum electricity consumption in a grid during a specific period, typically hot summer afternoons.
Electricity Rate
The price charged per kilowatt-hour of electricity, varying by customer class (residential, commercial, industrial).
Time-of-Use (TOU) Rates
Pricing that varies by time of day, with higher rates during peak demand hours and lower rates off-peak.