How Demand Tariffs Work and How They Affect Business Energy Cost
Electricity bills can be complex to understand, especially when demand charges are involved. For businesses with demand tariffs, energy costs are influenced by more than just how much electricity is used. Demand charges apply based on the highest amount of electricity pulled from the grid at a given time, not just total usage over the month. That’s why understanding how Business Electricity Plans are structured is crucial for cost management and better forecasting. What is a Demand Tariff? Unlike flat or time-of-use tariffs, demand tariffs charge your business not just for the energy consumed (in kilowatt-hours or kWh), but also for the maximum amount of energy drawn at one time - measured in kilowatts (kW). This is referred to as demand. You can think of it as the difference between how much water you use and how wide you open the tap. Demand charges are based on how wide that “tap” opens at your busiest moment in the billing period, even if only for 15 or 30 minutes. Most demand tar...