Many commercial and industrial facilities systematically overpay for electricity demand charges because they never compare their actual 15‑minute peak demand against the contracted demand level they agreed to with their utility. Regulators require a fixed contracted demand, but the recorded peak — measured in 15‑minute intervals across both peak and off‑peak periods — often falls well below that contracted figure, leaving money on the table. Simply tracking this data and adjusting the contracted level can lock in immediate, recurring savings without any capital investment.
Demand charges typically represent 30‑50 % of a large customer’s electricity bill, yet the contracted demand is often set during initial service activation or after a major expansion and then left untouched for years. Utilities bill based on the highest 15‑minute average in each billing period, so even a single spike — a chiller starting simultaneously with lighting and compressors — can ratchet the contracted demand upward for months. Because the metric is straightforward and the data is already captured by interval meters, the oversight is less about technical difficulty than organizational inertia.
Energy managers who implement a monthly review of recorded versus contracted demand routinely find 10‑20 % reductions in demand charges within the first year. The process involves pulling interval data from the utility portal or an energy management system, identifying the true monthly peak, and requesting a contract adjustment when the recorded peak consistently trails the contracted level by a comfortable margin. Some utilities automate this with “demand ratchet” clauses that lower the contracted demand after a sustained period of lower usage, but many still require a formal request.
Beyond direct cost savings, right‑sizing contracted demand improves load factor and gives operators clearer visibility into operational patterns. It also creates a baseline for more advanced strategies such as demand response participation, on‑site storage dispatch, or scheduled equipment sequencing to shave peaks further. In an era where every kilowatt of flexibility carries value, ignoring this low‑hanging fruit is increasingly hard to justify.
Read the full report at Energy Central.