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Demand Charges

What is Demand?

“Demand” is the total amount of electricity being used by a consumer at any one time. Demand varies from hour to hour, day to day and season to season. This usage, which is expressed in kilowatts (not kilowatt-hours) is called the “demand” on the system. Lower Yellowstone Rural Electric Cooperative monitors demand over a 15-minute period. The member is charged for the highest 15-minute average recorded on the demand meter. After LYREC reads the meter each month, demand is reset to zero and the meter starts over, recording the highest 15-minute average for the next billing period.

What is demand charge?

Demand charge is based on each member’s maximum 15-minute demand on the cooperative’s distribution system each month. Demand is measured in kilowatts (kW). Members are billed according to kW of demand for their rate.

To illustrate how demand charge can affect an electric bill, let’s look at two simple examples:

Running a 20 kW load for one hour would result in usage of 20 kilowatt hours (kWh) and accrue a demand charge of 20 kW.

20 kW x 1 hour = 20 kWh.

Demand = 20 kW.


Running a 2 kW load for 10 hours would also result in usage of 20 kWh but would only accrue a demand of 2 kW.

2 kW X 10 hours = 20 kWh.

Demand = 2 kW

Both examples use the exact same amount of energy (20 kWh) and perform the same amount of work. However, the resulting bills will be very different.

Applying Lower Yellowstone’s Three Phase Rate Schedule demand charge of $12.85 per kW and an energy charge of 7.1¢ per kWh to both examples produces the following results:

Bill number 1

20 kW x $12.85 = $257.00

20 kWh x .071 = $1.42

Total = $258.42


Bill number 2

2 kW x $12.85 = $ 25.70

20 kWh x .071= $1.42

Total = $27.12

Why so different?

The actual energy (kWh) used is the same, and the work done is the same. The difference between the bills is based entirely on the highest demand recorded during any given 15-minute period that month.

Why is demand charges used?

Demand charges are the way your co-op pays for generation and distribution capacity it needs to meet peak demand that occurs from time to time. The demand charge your co-op pays to its wholesale power supplier is also calculated on the basis of the highest demand during the month. Lower Yellowstone Electric uses the same method to bill demand to its demand-rate customers.

Who incurs a demand charge?

· Three-phase Customers

· Large Single-phase customers

· Irrigators.

Are demand charges unique to Lower Yellowstone Electric?

No. Demand charge billing is used consistently in the electric utility industry.

How can demand charges be reduced?

To reduce demand change, simply examine you operation. 

· What energy-efficient improvements can be made?

· Does all of the equipment need to be running at the same time?

· If not, what can be turned off while other equipment is running?

It is helpful to know when your meter is read each month. If possible, wait until after the meter has been read to run equipment that is operated infrequently.

 For example, if you want to move your pivot early in the season but will not be using it within the month, know when your meter is read. It is best to wait if possible till after it is read  instead of moving it for a short period prior to the reading that month. If you operate the pivot before the meter is read you will be billed for energy and demand for the entire month. Waiting until after the reading date could save you money.


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