What a demand charge actually is
Most people are billed for two things: the daily supply charge and the kWh they use. A demand charge adds a third. Instead of measuring how much energy you use in total, it measures how hard you hit the grid at your busiest moment — your highest rate of power draw, in kilowatts (kW), during the billing period.
The meter records your power in short intervals (usually 30 minutes). It finds the single interval where you drew the most power at once, and you are charged based on that peak, often expressed in dollars per kW. Run the oven, air conditioner, dryer and kettle all at the same time, and that one overlapping half-hour can set your demand charge for the whole month — even if your total kWh were modest.
Why retailers and networks use them
The grid has to be built to handle the worst moment, not the average one. Networks argue that a household spiking to a high draw at 6pm costs the system more to serve than one using the same total energy spread evenly through the day. Demand charges are meant to reflect that cost and nudge people to spread their usage.
Demand tariffs are becoming more common, particularly for homes with solar, batteries, EVs or three-phase power, and in some networks they are being applied more widely. The tricky part is that they are hard to predict — a single careless half-hour can cost you, and the charge does not shrink just because you were frugal the rest of the month.
How to reduce a demand charge
- Avoid running several high-draw appliances at once — stagger the oven, dryer, dishwasher, air conditioner and EV charger rather than overlapping them.
- Find out your demand window. Many demand charges only apply during a set period (often weekday late afternoon and evening); usage outside that window may not count toward your peak.
- Shift big loads out of the demand window where you can — pre-cool the house, run the dishwasher later, charge the EV overnight.
- If you have a battery, use it to shave the evening spike so the grid sees a lower peak.
- Check whether a plan without a demand charge would suit you better — for many households it is cheaper overall, and EnergySorted can cost demand and non-demand plans side by side against your usage.
Key terms
- Demand (kW)
- The rate at which you draw power at a given moment — how hard you are hitting the grid, not how much energy you use overall.
- Demand window
- The set period (often weekday evenings) during which your peak demand is measured for billing.
- Anytime demand
- A demand charge based on your highest draw at any time of day, not just a set window.
- Peak shaving
- Reducing your highest half-hour of power use — by staggering appliances or using a battery — to lower the demand charge.