Demand Charges: The Line Item That Wrecks Your Budget in 15 Minutes.

The demand charge is the most misunderstood component of a commercial electricity bill. Unlike the energy charge — which is simply kilowatt-hours times a rate — the demand charge is calculated based on the highest power draw during the billing period, measured in 15-minute intervals.

For commercial facilities, this means that a single equipment startup event, a brief coincidental peak when multiple large loads run simultaneously, or a measurement anomaly in the interval metering system can set the demand charge for an entire month.

Industry data suggests that demand charges represent more than 30% of the total electricity bill for nearly 40% of commercial facilities. For industrial and large commercial customers on time-of-use rates, that percentage can reach 50-60%.

The audit opportunity in demand charges is threefold: first, verifying that the measurement methodology is being applied correctly; second, confirming that the correct demand determination period is being used; and third, identifying whether the facility qualifies for demand charge mitigation options — interruptible service, demand response programs, or alternative tariff structures — that have never been evaluated. Independent research backs the scale of this exposure. The Clean Energy Group and the U.S. Forest Service both document demand charges representing 30% to 70% of the total commercial electricity bill, with large commercial and industrial accounts frequently landing at the high end of that range — meaning a measurement or methodology error in this single line item can move the entire bill materially.