What is Residential Demand?
When it comes to electric usage, demand is the amount of electricity being required of the grid at one time. It can be applied to all users at once, or one user at a time. For billing purposes, residential demand focuses on each customer separately through a monthly demand charge.
The demand charge is intended and designed to fairly allocate the costs of providing energy based on a customer's “demands” from the electric distribution system. A customer who uses a lot of energy all at once demands more energy at that point in time. Customers whose energy is spread across the day demand less energy at any given time. More demand equates to higher costs for the utility in terms of grid maintenance and power purchases.
The demand rate is applied to the single highest amount of electricity a customer uses (or demands) during a single hour in the billing period. Like TOU charges, a customer has the power to reduce their demand charge by shifting usage. (Demand is independent of peak and off-peak hours.) If a customer runs an air conditioner, charges their electric vehicle, does their laundry, and runs their dishwasher all at the same time, their demand will be much higher than if they had spread those tasks throughout the day.
Demand will be charged at the rate of $1.00 per KW of the highest demand hour in the billing period once the Time-of-Use and Residential Demand structure is active, which will occur no sooner than July 2026. Per the American Public Power Association, the average residential peak demand is 6 KW, which would result in $6.00 charge.
Demand examples
The charts above and below represent two households, both using 60 kWh in a 24-hour period. Household One's demand is 6 KW and Household Two's demand is 3 KW, even though both households use the same total kWh. Household One will have a higher financial impact on the distribution system and infrastructure because they are requiring more from the grid by drawing 6 KW of electricity at once, while Household Two is requiring no more than 3 KW of electricity at once. Assume this 24-hour period represents each customer's highest demand day of the billing period. Household One will see a higher demand charge for the billing period as it will be based on 6 KW while Household Two's demand charge will be based on only 3 KW.
