Demand Charges: How to Save Money on Your Electric Bill

Imagine you’re sitting down to pay your electric bill, and you see a line item for “demand charge.” You’re confused. What is demand charge? And why is it so high?

In this article, we’ll answer those questions and more. We’ll explain what demand charge is, how it works, and how you can save money on your electric bill by taking advantage of it.

What is demand charge?


Demand charge is a type of electricity pricing that charges customers based on their peak usage. In other words, it doesn’t matter how much electricity you use overall, it only matters how much you use at once.

Demand charges are typically used for commercial and industrial customers, but they’re becoming more common for residential customers as well. This is because demand charges can help utilities to manage peak demand, which can reduce the need for new power plants and infrastructure.

The Mechanism of Demand Charges

Demand charge is typically calculated by taking the highest 15-minute interval of usage in a billing period and multiplying it by a demand charge rate. For example, if your demand charge rate is $10 per kilowatt-hour (kWh) and your peak usage is 10 kWh, then you’ll be charged $100 for demand charge.

Demand charges can be expressed in a variety of ways, but they all have the same basic principle. The higher your peak usage, the more you’ll pay for demand charge.

There are a few things you can do to benefit from a demand charge rate:

Use energy-efficient appliances and devices. This will help to reduce your peak usage.

Shift your energy use to off-peak hours. This can be done by running appliances and devices during the night or on weekends.

Install solar panels. Solar panels can help to reduce your overall electricity usage, which can lower your demand charge.

What does this mean for you?

If you’re on a demand charge rate, it’s important to understand how it works and how you can take advantage of it. By following the tips above, you can save money on your electric bill and reduce your impact on the environment.

HEMS App Integration: Empowering Demand Charge Mitigation

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