The short answer
kWh measures energy over time; kW measures demand. Commercial demand charges apply a tariff rate to billed demand, which may differ from the month's measured peak.
The decision this guide helps you make
Identify the tariff definition of billed demand before modeling a reduction. Ratchets, minimums and contract-demand provisions can limit the immediate savings.
Evidence to gather before deciding
Gather billed kW, measured peak kW, interval data, billing period, demand rate and the utility's demand calculation rules.
The detail that is easy to miss
Staggering large equipment may lower coincident peak demand even if total energy stays similar. A demand-management plan must protect operations, comfort, refrigeration and safety.
Measured peak is not always billed demand
Decision case · figures, where used, are hypothetical
Suppose measured peak falls from 120 to 95 kW, but an illustrative tariff minimum keeps billed demand at 110 kW. At $15/kW, immediate modeled savings are $150, not $375. The actual tariff determines the billable reduction.
What would make this decision ready?
Find the peak timestamp and interval length. A brief equipment start is not automatically the interval peak. Check separate demand determinants and operational constraints before changing controls.
Understand energy versus power
A 10 kW load running for two hours uses 20 kWh. That does not mean its contribution to billed demand is always 10 kW: meters average power over defined intervals, equipment may overlap, and the tariff may apply other tests. Keep the interval length, billing period and units beside the data. A monthly kWh total describes energy consumption but cannot reconstruct the peak on its own.
Find what actually sets billed demand
Request the tariff definition and compare billed kW with the measured peak. A ratchet can use a prior peak; a contract minimum can create a floor. Capacity obligations in supply contracts may depend on different periods from local utility demand charges. Ask which component an operating change can affect and when. Avoid adding projected demand and capacity savings together unless the evidence supports both independently.
Test changes safely
Use interval data to identify simultaneous loads, then evaluate staggered starts, charging controls and schedules with the people responsible for the site. Protect refrigeration, ventilation, medical loads, production quality and comfort. A measured reduction is useful only if it is repeatable and does not shift a larger cost elsewhere. Keep a change log and compare equivalent operating periods; a quiet month after a production shutdown is not proof of a controls project’s benefit.
A demand-charge example
Illustrative billing inputs: a current billed demand of 100 kW, proposed billed demand of 85 kW and a rate of $12 per kW. The modeled demand-charge difference is $180 for that month. If a ratchet keeps billed demand at 100 kW, that immediate difference would be zero even if a measured peak falls. The calculator therefore asks for billed demand, with exclusions stated next to the output. It does not certify engineering performance or annual savings.
| Record | Why it matters | How to verify |
|---|---|---|
| Account and scope | Keeps the decision tied to the right service and customer. | Use the current utility, meter and customer class; keep account identifiers private. |
| Period and units | Prevents comparisons across different months or measures. | Write down billing days and whether the amount is kWh, kW, therms or dollars. |
| Written terms | Distinguishes a claim from an obligation. | Save the full proposed agreement, tariff or program notice and its date. |
| Unknowns and exclusions | Shows what the estimate cannot establish. | List unresolved charges, eligibility and operating assumptions before deciding. |
Use a tool without sending your numbers
A calculator is useful for checking an assumption, not for confirming a tariff, incentive or legal interpretation. Enter only nonidentifying figures in the relevant worksheet. If you need a human review, describe the question and utility first; do not paste an account number or confidential document into the inquiry. Keep the model alongside the written terms so an apparently precise output is not mistaken for a complete quote.
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Sources & further checks
Primary references checked for this guide on October 15, 2026. Follow the source for current tariffs, eligibility and program terms; rates here are not live offers.