Decoding Demand Charges on Your Commercial Electricity Bill
If your electricity bill feels higher than it should be, the answer may lie in a hidden line item: demand charges on your commercial electricity bill. These charges can represent up to 50% or more of a business’s total electricity costs, yet many business owners don’t fully understand what they are or how they’re calculated.
In this blog, we’ll decode demand charges, explain how they impact your energy spend in Houston, and show you how to reduce them with strategies from EcoWise Energy Services.
What Are Demand Charges and Why Do They Matter to Your Commercial Electricity Bill?
Unlike residential energy bills that are mostly based on the total electricity consumed (kWh), commercial electricity bills often include demand charges — fees based on the highest level of power your business draws at any moment, measured in kilowatts (kW).
🔌 In simple terms:
If you have one 15-minute interval where you use a lot of power (say, turning on all equipment at once), your provider sets your demand charge based on that single moment — and you pay for it all month.
How Are Demand Charges on Your Commercial Electricity Bill Calculated?
Demand charges are based on your peak usage, not average. Utilities track your highest demand within a billing cycle, usually over a 15-minute or 30-minute interval.
Here’s how it typically breaks down:
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Demand charge = Peak kW x Demand rate ($/kW)
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The demand rate can range from $5 to $20+ per kW in Houston.
So, even if you manage to reduce usage overall, one bad spike can still cost you big.
Industries Most Affected by Demand Charges
While nearly all commercial customers see demand charges, they especially impact:
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Manufacturing plants
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Warehouses with HVAC or refrigeration
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Restaurants with high equipment loads
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Commercial laundromats
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Medical offices with large diagnostic machines
If you’re in one of these sectors, managing demand is not optional — it’s essential.
Strategies to Lower Demand Charges
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Stagger Equipment Start-Up
Don’t power everything at once. Start HVAC, machinery, and lighting in phases. -
Use Battery Storage
Store energy during off-peak hours and use it during peaks to reduce draw from the grid. -
Install Smart Energy Management Systems
Track and control usage in real time to prevent spikes. -
Pre-Cool or Pre-Heat Spaces
Adjust HVAC settings before peak periods to minimize usage when rates are highest. -
Employee Training
Educate your team to recognize peak hours and reduce unnecessary usage during those times.
Need help applying these strategies?
👉 Request your free demand analysis from EcoWise Energy Services
How EcoWise Energy Services Can Help
At EcoWise Energy Services, we specialize in helping Houston businesses:
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Analyze past billing data
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Identify peak usage trends
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Implement demand-limiting strategies
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Select better rate plans and providers
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Monitor performance to ensure ongoing savings
As energy brokers, we work for you, not the electricity companies — helping you save, not spend.
Conclusion:
Demand charges on your commercial electricity bill are one of the most misunderstood — and most expensive — parts of your monthly energy costs. But once you understand them, you can control them.
Let EcoWise Energy Services help you decode, manage, and reduce your demand charges so your business can thrive — even in Houston’s high-demand market.
👉 Click here to lower your next commercial electricity bill