Understanding General Secondary Rate Demand Charges
Knowing how your electric use is billed and how your demand and energy charges are calculated will help you understand and manage your total energy costs.
Difference between Energy and Demand
Electricity use profile sample
Energy Charge
Energy charge is the calculation of the amount of electricity kilowatt-hours (kWh) consumed during the billing period.
Example: 10 light bulbs use 100 watts of electricity. If all 10 are lit for one hour, they consume one kWh of electricity:
10 light bulbs x 100 watts x one hour = 1,000 watt-hours (1 kWh) Your meter records the amount of energy used on-peak and off-peak.
Energy Charges on your bill
Your bill indicates how much energy was used on-peak (between 9 a.m. and 9 p.m. Monday – Friday) and off-peak (between 9 p.m. and 9 a.m. Monday – Friday), weekends, and designated holidays (New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day). The kWh energy charge is more during on-peak hours than for off-peak hours.
Demand Charges
Demand is the rate at which you consume electricity – or the amount needed to power your business at any given point in time. Demand charges are based on the highest level of electricity you demand at one time during the billing period and at the time of day, it’s needed by your business. A single light bulb demands 100 watts of electricity at any given moment. In the energy charge example, the 10 light bulbs demanded 1,000 watts (1 kW) of electricity to operate.
Rate Demand charges on your bill
Demand charges appear as two separate charges on your bill.
Power supply on-peak demand charge – This charge is for the 15-minute interval when you use the most electricity during the on-peak time period (9 a.m. to 9 p.m. weekdays) for the current bill.
Delivery customer maximum demand charge – This charge is for the 15-minute interval when you use the most electricity during any time of the day for the current or previous 11 months of bills.
Reason for separate charges
We invest in generation and distribution equipment to meet the maximum demand that all customers may require at one time. We use peak demand to properly size electric service for our customers and to ensure that there is sufficient generating capacity available. Separate charges for energy consumption and demand more fairly distribute the costs of providing service to customers who use large amounts of energy.
Your energy charges are based only on the total amount of energy you consume. Your demand charges are based on the highest level of electricity you demand at one time during the billing period and at the time of day it’s needed by your business.
Total energy consumption and demand are not necessarily related
In the example below, the total electric consumption, measured in kWh, by Company B was actually less than Company A. But because B’s on-peak demand (measured in kW) was much higher, Company B’s total charges were higher.
| Company A | Company B | |
|---|---|---|
| Energy consumption | 19,000 kWh | 15,000 kWh |
| Power supply | ||
| On-peak energy charge | 12,000 kWh x $0.06 = $720.00 | 10,000 kWh x $0.06 = $600.00 |
| Off-peak energy charge | 7,000 kWh x $0.04 = $280.00 | 5,000 kWh x $0.04 = $200.00 |
| On-peak demand | 60kW | 100kW |
| Demand charge | 60 kW x $11.75 = $ 705.00 | 100 kW x $11.75 = $1,175.00 |
| Delivery | ||
| On-peak energy charge | 12,000 kWh x $0.02 = $240.00 | 10,000 kWh x $0.02 = $200.00 |
| Off-peak energy charge | 7,000 kWh x $0.02 = $140.00 | 5,000 kWh x $0.02 = $100.00 |
| Customer maximum demand | 80kW | 140kW |
| Demand charge | 80 kW x $6.75 = $ 540.00 | 140 kW x $6.75 = $945.00 |
Managing demand charges
- Shift some use to off-peak hours (9 p.m. – 9 a.m., weekends and holidays).
- Be aware of your on-peak use. Starting large motors or processes during on-peak hours can cause demand spikes that may increase your demand charges.
- Use energy at a steady pace, especially during on-peak hours; steady load helps control demand charges.