Demand Charge Cost Calculator

A demand charge estimate converts a facility’s billed electrical demand into a monthly and comparison-period cost. The calculator produces two planning numbers:

• Monthly demand charge in $/month
• Demand charge for billed period in $/period

Demand charges are generally based on measured or billed peak demand, expressed here as Billing demand in kW. They are separate from energy charges based on kWh consumption. A building may use relatively modest total energy yet incur a substantial demand charge if its highest interval of simultaneous load is high.

The result helps quantify the operating-cost effect of peak electrical loading during equipment selection, load reviews, motor operating schedules, HVAC staging, process expansion, and demand-management planning. It does not size conductors, raceways, overcurrent protection, or service equipment. Those electrical design decisions require the calculated load, ampacity, terminal ratings, adjustment and correction factors, voltage-drop review, available fault current, and applicable code requirements.

Billing Demand and Demand Charge

Billing demand is the demand value used by the serving utility for billing, entered in kW. It may reflect a recorded peak, a contract demand, or another tariff-defined billing quantity. For this estimate, the entered value is treated directly as the billed demand.

Demand charge is the utility demand-price input, expressed in $/kW-month. The calculator multiplies this rate by Billing demand to determine the monthly demand cost.

Billing months is the number of months included in the comparison period. It allows a monthly demand-charge result to be extended across an annual budget, seasonal operating period, lease period, or other selected timeframe.

Calculator field	Unit	Electrical cost use
Billing demand	kW	The demand quantity used for the estimate
Demand charge	$/kW-month	Cost applied to each billed kW per month
Billing months	months	Number of billed months in the comparison period
Monthly demand charge	$/month	Estimated demand-cost component for one month
Demand charge for billed period	$/period	Estimated demand-cost component across the entered period
Effective rate	$/kW-month	The entered demand-charge rate carried into the result

A demand charge does not indicate how many kWh a facility used. It indicates the cost associated with the demand quantity used by the bill calculation. Energy consumption, power factor treatment, time-of-use pricing, and tariff-specific billing rules may change the actual utility bill without changing the worksheet’s arithmetic.

Demand-Charge Formula

The calculator uses the following formulas:

\(\displaystyle \text{monthly demand charge} = \text{billing demand kW} \times \text{demand charge per kW-month}\)

\(\displaystyle \text{demand charge for billed period} = \text{monthly demand charge} \times \text{billing months}\)

The Effective rate is reported in $/kW-month and corresponds to the entered Demand charge.

For example, reducing a site’s Billing demand by 10 kW at a $12/kW-month demand charge reduces the estimated monthly demand-charge component by $120/month. Over 12 billed months, that same reduction represents $1,440/period under the calculator’s fixed-rate assumptions.

Calculation Example

Enter the following values:

Input	Entered value
Billing demand	50 kW
Demand charge	$12/kW-month
Billing months	12 months

Monthly demand charge:

\(\displaystyle 50 \text{kW} \times $12/\text{kW-month} = $600/month\)

Demand charge for billed period:

\(\displaystyle $600/\text{month} \times 12 \text{months} = $7,200/period\)

The calculator result is:

Result	Value
Monthly demand charge	$600/month
Demand charge for billed period	$7,200/period
Effective rate	$12/kW-month

This estimate isolates the demand-charge portion of electrical cost. It does not include kWh energy charges, fixed customer charges, taxes, fuel adjustments, or other bill components.

Load Review and Peak Demand

Demand-cost review is commonly performed alongside electrical load analysis when a project adds major equipment or changes how existing equipment operates. Motors, electric heat, chillers, packaged HVAC units, compressors, pumps, welders, process equipment, and EV charging equipment can increase simultaneous demand even where the existing service has adequate calculated ampacity.

A practical review compares the expected operating overlap of significant loads:

• Motor starts and run schedules
• HVAC compressor staging
• Electric resistance heat operation
• Process equipment cycles
• Battery charging windows
• Building automation controls and load-shedding sequences

The demand-charge estimate can show the economic value of changing sequencing or reducing coincident operation. It does not determine whether a feeder, branch circuit, service, conductor, or disconnect is adequately rated. Those decisions require separate evaluation of load calculations, conductor ampacity, insulation temperature rating, terminal limitations, overcurrent protection, raceway fill, and voltage drop where applicable.

Tariff and Field Limits

The calculation assumes that the entered Billing demand is billed at the entered Demand charge for every selected Billing month. It does not apply a utility’s coincidence rule, demand interval definition, ratchet provision, minimum bill, taxes, riders, power-factor treatment, seasonal rate changes, time-of-use demand periods, or tariff reconciliation.

Confirm the applicable tariff and actual utility billing methodology before using the result for procurement, guaranteed savings, tenant billing, or financial approval. For electrical construction and code compliance, verify equipment ratings, service and feeder capacity, calculated loads, and AHJ requirements independently of this demand-charge estimate.