What is a demand charge on a residential electric bill?

Everything else on your bill measures energy: kilowatt-hours, a quantity, like gallons of water. A demand charge measures power: kilowatts, a rate, like the width of the pipe. Two households can pull the same number of kilowatt-hours through the month and be billed very differently if one of them took it in a smooth trickle and the other in violent spikes.

Why utilities charge for it

The grid has to be built for the worst moment, not the average one. A transformer serving a street has to handle the instant when everyone’s air conditioner, oven and car charger happen to coincide, even if that instant lasts fifteen minutes a year. That capacity is expensive and it is idle most of the time. A demand charge is the utility saying: the size of the equipment we had to install for you is itself a cost, and here it is.

The logic is sound and the application to households is contentious. A commercial customer has an energy manager and a control system. A family does not, and generally has no idea what their peak fifteen minutes looked like until the bill arrives.

How it is measured

The details vary by tariff, and they matter a great deal:

• The interval. Usually 15, 30 or 60 minutes. A shorter interval punishes brief spikes more harshly, because there is less time for an average to smooth them out.
• The window. Some tariffs count your peak at any time; others only during on-peak hours. The second kind is much more forgiving — a 3am car charge cannot hurt you.
• The ratchet. A few tariffs set your minimum billed demand from your highest reading in the last eleven or twelve months. One bad afternoon can then follow you for a year. Ratchets are rare on residential plans but not unheard of.

What actually creates a household peak

It is almost never one appliance. It is coincidence. A rough sense of continuous draw:

• Electric vehicle charger (Level 2): 7–11 kW
• Central air conditioning: 3–5 kW
• Electric resistance water heater: 4–5 kW
• Clothes dryer: 3–5 kW
• Electric oven or range: 2–5 kW

Run four of those together on a hot evening and you are at 20 kW. Stagger them and you might never exceed 8. On a tariff charging, say, $9 per kW, that difference is over $100 in a single month — for exactly the same total electricity.

Living with one

1. Find out how yours is measured — interval, window, and whether there is a ratchet. The tariff document linked on each of our rate pages will say.
2. Stagger the big loads. Nearly all the benefit comes from not running the car charger, the dryer and the oven at once. Delay timers on appliances cost nothing.
3. Turn the car charger down. Most EVs and chargers let you cap the current. Charging at 24 amps instead of 40 takes longer and cuts several kilowatts off your peak, which is usually irrelevant to a car parked overnight.
4. Check whether you should be on it at all. Demand-charge residential tariffs are usually optional, and usually pitched at households that can flatten their load. If yours cannot, a conventional plan is very likely cheaper.