Enter the maximum demand during any 15 minute period (kW) and the demand charge rate (typically in $/kW per billing period, often $/kW-month) into the Calculator. The calculator will evaluate the Demand Charge.
Related Calculators
- Total Cost Calculator
- Allocated Cost Calculator
- Indirect Costs Calculator
- Variable Margin Calculator
- All Business Calculators
Demand Charge Formula
DC = MD15 * DR
Variables:
- DC is the demand charge (typically $ per billing period, often $/month)
- MD15 is the maximum demand during any 15 minute period (kW)
- DR is the demand charge rate (typically $/kW per billing period, often $/kW-month)
To calculate Demand Charge, multiply the maximum demand during the demand interval by the demand charge rate from your utility tariff.
How to Calculate Demand Charge?
The following steps outline how to calculate the Demand Charge.
- First, determine the maximum demand during any 15 minute period (kW).
- Next, determine the demand charge rate from your bill or utility tariff (typically $/kW per billing period, often $/kW-month).
- Next, gather the formula from above = DC = MD15 * DR.
- Finally, calculate the Demand Charge.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
maximum demand during any 15 minute period (kW) = 300
demand charge rate ($/kW-month) = 12.50
Demand Charge ($/month) = 300 × 12.50 = 3,750
Frequently Asked Questions
What is a Demand Charge in electricity billing?
A Demand Charge is a fee charged by some utility companies based on your highest measured electric demand during the billing period. Demand is typically calculated as the average power (kW) over a set interval such as 15 minutes, and the charge is usually calculated using a demand rate (for example, $/kW-month), separate from the energy rate ($/kWh).
How does the maximum demand during a 15-minute period affect my electricity bill?
The highest 15-minute (or other interval) demand recorded during the billing period is often used as the billing demand. A higher peak demand can result in a higher Demand Charge, encouraging customers to manage and reduce short-duration peaks.
Why do utility companies charge a Demand Charge?
Utility companies may impose a Demand Charge to help recover the costs of maintaining generation, transmission, and distribution capacity needed to serve customers’ peak power requirements and to support grid reliability.
Can I reduce my Demand Charge on my electricity bill?
Yes. You can often reduce Demand Charges by reducing peak demand (kW), for example by staggering large loads, using demand controls, shifting discretionary usage away from peak times, and improving efficiency.
