Demand charges and energy charges on your utility bill serve distinct purposes, reflecting different aspects of electricity usage.
Energy Charges
- Definition: Energy charges are based on the total amount of electricity consumed during a billing period, measured in kilowatt-hours (kWh).
- Purpose: These charges reflect the amount of electricity you use over time.
- Billing: Typically, energy charges are calculated based on the total kWh consumed each month, with rates possibly varying between on-peak and off-peak hours.
Demand Charges
- Definition: Demand charges are based on the maximum rate at which electricity is used, measured in kilowatts (kW). This is often calculated over a specific interval, such as 15 minutes.
- Purpose: These charges account for the peak demand placed on the electrical grid. Utilities incur significant costs to ensure they can meet this peak demand even if it only occurs for brief periods.
- Billing: The demand charge is calculated based on the highest kW reading during the billing period. This charge reflects the infrastructure costs associated with meeting peak demand, such as generating capacity and grid maintenance.
In summary, energy charges focus on the total amount of electricity used over time, while demand charges focus on the maximum amount of power needed at any given moment. Both components are essential for utilities to manage and distribute electricity effectively.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-demand-charges-differ-from-energy-charges-on-my-utility-bill/
