A kilowatt-hour is an amount of electricity; a kilowatt is how fast it is being used. The two show up on a business bill as two different charges, and the second one, the demand charge, is the line that decides whether an account counts as a small business for its utility. This guide explains what demand is, where the utilities draw the line, how to read it on your bill, and what to do on either side of it.
kW and kWh
Think of kWh as miles and kW as speed. A 1 kW heater running for an hour uses 1 kWh; ten of them running for six minutes use the same 1 kWh, but for those six minutes the building is drawing 10 kW. The wires, transformer and meter serving the building have to be sized for the speed, not the distance, and that is what a demand charge pays for.
How demand is measured
The smart meter records usage every 15 minutes. The utility takes the busiest 15-minute interval of the billing month, converts it to an average kW, and calls that the month’s demand (the tariffs call it the non-coincident peak, or NCP kW; CenterPoint measures in kVA, which for a small account is close to the same number). One quarter-hour sets it. A shop that pulls 12 kW once, when the ovens, the air conditioning and the walk-in compressor happened to start together, has a 12 kW month even if the other 2,900 quarter-hours averaged 3 kW.
Where the line is
Each utility has a smallest business class that pays no demand charge at all, just a monthly charge and a charge per kWh, like a home. Oncor and AEP Texas put the line at 10 kW, CenterPoint at 10 kVA, TNMP at 5 kW. Above it the account moves to a demand-metered class: a charge per kW of billed demand every month, with a lower charge per kWh. Many tariffs add a ratchet, under which the billed demand can be a share of the highest peak in the past year rather than this month’s, so one hot afternoon in August can raise delivery charges into the winter. Moving back down is slow: Oncor, for example, requires twelve months at or below 10 kW before an account returns to the small class.
What 10 kW looks like
Nameplates overstate real draw, but a rough picture helps. A 5-ton air conditioner pulls about 6 kW while running. Add 1.5 kW of lighting, a reach-in fridge and an ice machine at 1.5 kW together, and half a kilowatt of computers and a card terminal, and a small shop sits near 9.5 kW when everything runs in the same quarter-hour. A second air conditioner, an electric oven, a 7 kW car charger or a welder puts it over. An office with a single rooftop unit and no kitchen is usually under; a restaurant is usually over; a salon, a small church or a storefront with one or two units is usually under, but close.
Monthly kWh is a weak guide, which is why the utility doesn’t use it. An account that never exceeds 10 kW could in principle use 7,300 kWh in a month by running flat out; real small accounts use a fraction of that, which is why small-commercial labels price 1,500, 2,500 and 3,500 kWh. But a 5,000 kWh month can belong to a bakery that peaks at 25 kW or to a server closet that hums along at 7.
Reading it on your bill
Look at the delivery or TDU section, not the energy charge. A small-class account shows a customer or metering charge and a delivery charge per kWh, and nothing else. A demand-metered account adds a line with kW or kVA in it: “demand,” “billed kW,” “NCP kW,” or a distribution charge priced per kW. Some providers fold delivery into one line; then the plan’s label is the tell, because a plan for demand-metered accounts says so and its average-price table carries a demand row. If you can log in to Smart Meter Texas for the business’s ESI ID (see what an ESI ID is), its 15-minute data shows the peaks themselves.
Why this site prices only the small class
Monthly kWh, which is what a bill gives us, is enough to price a plan with a monthly charge and a per-kWh charge, exactly. It cannot price a charge per kW, and a ranking that ignored a demand charge would be wrong in a way that varied from one business to the next. The published plans for demand-metered accounts are also few, and most of that market is sold by quote. So the business results, the business rates page and the plan list stop at the small class, and say so. If your bill shows a demand line, the prices here are not yours.
If your business is over the line
- Get quotes from two or three providers or a broker, and give each the same 12 months of bills, kW figures included.
- Ask for the demand-metered label or price sheet, the term, the base charge, whether delivery is included or passed through, and the early termination fee. The small-business guide has the rest of the list.
- Ask whether the demand charge on the quote is the utility’s alone, passed through at cost, or whether the provider adds one of its own.
- Trim the peak rather than the total: stagger equipment start-up, keep the air conditioning from restarting every unit at once after a setback, and keep the oven, the dishwasher and the compressor out of the same quarter-hour when a schedule allows it. A lower peak lowers the delivery bill every month, and a year below the line moves the account back to the small class.