Demand charge is based on each customer’s maximum 15 or 30-minute demand on the cooperative’s distribution system each month. Demand is measured in kilowatts (kW). Customers are billed according to kW of demand for their rate.
To illustrate how demand charge can affect an electric bill, look at two simple examples:
- Running a 20 kW load for one hour would result in use of 20-kilowatt hours (kWh) and accrue a demand charge of 20 kW. 20 kW x 1 hour = 20 kWh. Demand = 20 kW.
- Running a 2kw load for 10 hours would also result in use of 20kWh but would only accrue a demand of 2kW. 2 kW x 10 hours = 20 kWh. Demand = 2 kW.
Both examples use the exact same amount of energy (20 kWh) and perform the same amount of work. However, the resulting bills will be very different.
Applying a rate demand charge of $5 per kW and an energy charge of 5.00 cents per kWh to both examples produces the following results:
Bill Number 1
20 kW x $5 = $100.00 20 kWh x .05 = $1.00 Total = $101.00
Bill Number 2
2 kW x $5 = $10.00 20 kWh x .05 = $1.00 Total = $11.00