Demand charges: the part of your electric bill nobody explains
Open a commercial electric bill and you'll find two very different kinds of charges. One is for the electricity you used — kilowatt-hours, the number everyone understands. The other is for how fast you used it. That second one is the demand charge, and for many commercial buildings in the New York area it's a third of the bill or more.
What a demand charge actually is
The utility doesn't just deliver energy — it has to build enough wires, transformers, and capacity to handle your busiest moment. So it measures your usage in short intervals all month and bills you based on your single highest spike, measured in kilowatts (kW).
Here's the part that surprises people: one bad half hour can set the demand charge for the whole month. If your building's chillers, elevators, and kitchen equipment all fire up at once on a hot afternoon, you pay for that peak on every bill — even if the rest of the month was quiet.
Why New York buildings get hit hardest
Delivery rates in Con Edison territory are among the highest in the country, and demand charges make up a large share of delivery costs. Buildings with spiky load profiles — schools, houses of worship, event spaces, multifamily buildings with central cooling — often pay demand charges wildly out of proportion to their actual energy use.
Three ways to bring demand charges down
- Fix what's billing wrong. Before anything else, the rate class and the meter data should be checked. Buildings are regularly on the wrong rate for their usage pattern, and a bill audit can find errors and refunds without changing anything about how the building runs.
- Stagger the peak. Sometimes the fix is operational: sequencing equipment startups so the chillers and the elevators aren't hitting together. It costs nothing but attention.
- Shave the peak with a battery. This is where battery storage earns its keep in New York. A battery discharges during your peak moments, so the meter never sees the spike. The same battery can also earn payments from grid programs that pay buildings to reduce load on demand — two revenue streams from one asset, and incentive programs in New York can cover a substantial share of the cost.
The bottom line
Demand charges are the most fixable large line on a commercial electric bill — but only if someone actually reads the bill and models the building's load. That's the work we do. If you'd like to know what your demand charges are really costing you, send us a bill and we'll tell you.