Demand Charge
kW DemandA monthly fee based on a customer's single highest peak power draw (in kW) recorded during a short 15-minute interval.
Full Technical Definition
Unlike standard volumetric rates that bill for total energy consumed over time (kWh), a Demand Charge bills for the maximum rate of power consumption (kW) reached at any single moment. Electric utilities assess demand charges to recover grid infrastructure costs required to satisfy instantaneous peak loads.
Real-World Texas Example
If a home simultaneously turns on a 10 kW EV fast charger, a 5 kW HVAC compressor, and a 3 kW water heater during peak grid hours, instantaneous demand hits 18 kW. Under a $10/kW demand charge tariff, an extra $180 fee is added to the monthly bill.
Demand Charge ($) = Max 15-Minute Peak kW Draw × Demand Tariff ($/kW)Frequently Asked Questions
How do home battery systems eliminate demand charges?
Home batteries use automated peak-shaving algorithms to discharge battery power whenever household appliance usage spikes, capping grid draw below the demand threshold.