# Commercial Demand Charge Calculator

> Work out a business electricity bill with demand charges: billed kW including any ratchet, energy charge, load factor and true cost per kWh.

Category: Energy & environment · Applies to: Worldwide · Last updated: 2026-10-29
Interactive calculator: https://calculators.geekmidst.com/calculators/commercial-demand-charge-calculator

Commercial tariffs often bill the highest kW drawn in the month as well as kWh. Enter your peak demand, energy and tariff rates to see how much of the bill is demand-driven.

Also called: Demand charge calculator, Load factor calculator.

## Inputs
- Energy used in the period (unit kWh; default 30000)
- Energy price per kWh (default 0.10)
- Peak demand this period (unit kW; default 100)
- Demand charge per kW (default 12)
- Demand ratchet (unit %; default 0; optional)
- Highest earlier peak in the ratchet window (unit kW; default 0; optional)
- Fixed charges (default 50; optional)
- Days in the billing period (unit days; default 30)
- Currency

## Results
- Bill before tax
- Demand charge
- Energy charge
- Billed demand
- Load factor
- Demand share of the bill
- All-in cost per kWh

## Formula

```
Billed kW = max(Peak kW, Ratchet% × Earlier peak);  Bill = Billed kW × Demand rate + kWh × Energy rate + Fixed;  Load factor = kWh ÷ (Peak kW × Days × 24)
```

Where:
- Peak kW: highest metered demand in the period
- Ratchet%: share of an earlier peak that sets a minimum billed demand
- Load factor: average demand as a share of peak demand

## Worked example
1. Demand charge = 100 kW × 12 = 1,200; energy = 30,000 × 0.10 = 3,000.
2. Bill = 1,200 + 3,000 + 50 = 4,250 (0.1417 per kWh).
3. Load factor = 30,000 ÷ (100 × 30 × 24) = 30,000 ÷ 72,000 = 41.67%.

**Result:** A 100 kW peak adds 1,200 to a 4,250 bill, 28% of the total, with a load factor of 41.67%.

## What the result means

A low load factor means short, sharp peaks are driving the bill. Staggering equipment start-ups, shifting loads or a battery to shave peaks can cut the demand charge without reducing kWh.

## Assumptions and limits
- One demand rate and one energy rate for the period.
- Taxes are excluded; add them separately.
- Time-of-use demand windows, power-factor penalties and reactive charges are not modelled.

## Questions

### What is a ratchet clause?

A tariff rule that bills demand at no less than a set percentage of the highest peak in recent months, so one spike can raise bills for up to a year.

### What is a good load factor?

Higher is cheaper per kWh. A facility running steadily around the clock approaches 100%; one with brief daily peaks may be well under 50%.

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Source: GM¹X CalcVerse — https://calculators.geekmidst.com/calculators/commercial-demand-charge-calculator