Demand Charge Calculator

How to use the demand charge calculator

A commercial electric bill is really two bills stacked together, and this tool splits them out so you can see each one. You enter your peak demand in kilowatts, the demand rate your utility charges per kW, your total monthly usage in kilowatt-hours, and the energy rate per kWh — and you get back the total bill, the demand charge, the energy charge, and the share of the bill that the demand charge alone accounts for. Every field is pre-filled with a representative example (a 10 kW peak at $15/kW, 3,000 kWh at $0.12/kWh), so you can watch the tool work before you swap in the numbers off your own bill.

Start with the peak demand. This is your highest sustained power draw for the month, measured in kilowatts, not the energy you used over time. Utilities almost always read it as the single highest 15-minute interval in the billing period — the worst quarter-hour, not an average — so it captures the moment your loads stacked up the most. The default is 10 kW. If you do not know yours, it is printed on the bill, usually labelled “peak demand,” “billing demand,” or “kW,” and it is the one number on the bill that rewards you for staying smooth.

Next, the demand rate. This is the dollars-per-kilowatt your utility bills against that peak, and it comes straight off your own commercial bill — the $15/kW used here is only an illustrative figure. Multiply it by your peak and you have the demand charge, the part of the bill most residential customers never see at all. Then enter your monthly kWh, the total energy you used across the whole period (the usual meter number), and the energy rate per kWh, which is again your own bill’s rate — the $0.12/kWh here is illustrative.

Read the total first: it is the demand charge plus the energy charge, the bottom line your utility actually bills. Then look at the two pieces underneath. The demand charge is peak kW times the demand rate; the energy charge is monthly kWh times the energy rate. Seeing them separately is the whole point, because they answer different questions — one is about how hard you pushed, the other about how much you used.

Finally, the demand share tells you what fraction of the total the demand charge represents, as a percentage. On the defaults it lands near 29.4%, meaning almost a third of the bill is driven by one peak rather than by total consumption. That figure is the cue to act: if the share is high, shaving the peak buys you more than trimming usage. Run the tool once with your real numbers, then again with a lower peak, and the gap between the two totals is exactly what flattening your demand is worth.

The formula

A commercial bill adds two independent charges. One bills the energy you used over the whole month; the other bills the single hardest moment of power you drew. Compute each on its own terms and add them — that sum is the total, and the demand piece divided by the total is the demand share:

demand charge = peak kW × demand rate
energy charge = monthly kWh × energy rate
total = demand charge + energy charge

Worked example with the defaults — a 10 kW peak at $15/kW gives a demand charge of 10 × $15 = $150; 3,000 kWh at $0.12/kWh gives an energy charge of 3,000 × $0.12 = $360; the total is $150 + $360 = $510. The demand share is $150 ÷ $510 = 29.4% of the bill, set by peak power alone.

The demand charge is billed on your highest sustained draw, which utilities read as the peak 15-minute interval in the month — so a single brief spike, when a compressor, oven, and chiller all kick on at once, can set the demand charge for the entire month even though it lasted a quarter of an hour. That is why two businesses using identical kWh can pay very different bills: the spikier one pays more. Two levers cut it — peak shaving, meaning you avoid running big loads at the same time, and load shifting, meaning you stagger or time-shift large equipment (or lean on batteries) so the peak never stacks up.

Frequently asked questions