The demand charge is not a fee for the power you used. It is a fee for the fastest you ever used it. On many commercial accounts in the province it quietly grows into one of the largest lines on the invoice.
Full detail below.
Your meter records two completely different things. The first is energy, every kilowatt-hour that crosses the meter over the month, which is what most people picture when they think about a power bill. The second is demand, the highest rate at which your facility pulled power at any single moment in that month, recorded in kilowatts.
Your distributor typically samples that second number in fifteen minute intervals. Whichever interval came in highest becomes the peak that sets your demand charge. Everything else you did that month, every quiet overnight hour and every idle weekend, has no effect on it whatsoever.
This is why two facilities can consume exactly the same total energy in a month and receive very different bills. A shop that runs a steady load through the day and a shop that starts four large motors simultaneously at 6am can match each other kilowatt-hour for kilowatt-hour and still be billed hundreds of dollars apart, because only one of them created a spike.
The peak that sets your demand charge can last fifteen minutes out of a month containing roughly 2,900 of them. You can run an efficient, well-managed facility for four straight weeks and still be billed on one bad quarter hour on a Tuesday morning.
Whether a demand charge appears on your invoice at all depends on which distribution company serves your address, and that is fixed by geography rather than by choice. Businesses in ATCO Electric territory and those served by FortisAlberta will find demand charges on commercial accounts. The two large municipal distributors work differently.
| Distributor | Demand charges on small business? | Notes |
|---|---|---|
| FortisAlberta | Yes | System usage charge follows the highest metered demand in the period; transmission and facilities charges follow contracted demand. Rate minimum of 3 kW. |
| ATCO Electric | Yes | Takes the highest of the applicable criteria across transmission, distribution and service charges. Rate minimum of 5 kW. |
| ENMAX Power Corporation | No | Not applied to small business accounts. Larger interval-metered accounts can still be exposed. |
| EPCOR Distribution & Transmission | No | Not applied to small business accounts. Larger interval-metered accounts can still be exposed. |
Source: Utilities Consumer Advocate, Understanding demand charges. Rate minimums and billing determinants are set in each distributor's approved tariff and can change; check your current rate schedule for the figures that apply to your account.
The practical read for anyone in Calgary or the capital region: if your account is small and municipally served, the demand charge may simply not be your problem, and anyone selling you a fix for it should be able to point to the line on your bill first. If you are on an interval meter at industrial scale, that exemption stops protecting you.
The reading your meter captured is not automatically the figure you are billed on. Tariffs define a billing demand, and it is often the highest of several competing numbers.
The largest fifteen minute reading recorded during the billing period. This is the number most operators assume they are being charged on, and on some line items they are.
A capacity level agreed with the distributor. Certain charges, notably transmission capacity and local facilities, are billed against this figure whether or not you ever draw that much power.
A percentage of an earlier peak, carried forward. A single high reading in one summer can continue setting a floor under your bills for months, long after the load that caused it is gone.
Understanding which of these three is driving your invoice is the difference between a fix that works and money spent on the wrong problem. Each term is defined in full on the demand charge glossary.
Because the charge is set by intensity rather than volume, conservation alone is a weak lever. Turning equipment off for longer stretches lowers the energy charge and leaves the peak untouched. What moves the demand charge is flattening the spike itself, either by rescheduling the loads that collide, or by putting stored power behind them so the meter never sees the surge.
That distinction matters enough that it deserves its own page, because peak shaving, demand reduction and arbitrage are three different strategies that get treated as synonyms. The differences are set out here, and the practical options are covered in how to reduce demand charges.
A demand charge bills you for the highest rate of power your facility drew at any one moment during the billing period, measured in kilowatts, separately from the total energy you consumed in kilowatt-hours. Two facilities can use identical total energy in a month and pay very different demand charges if one draws its power in short heavy bursts and the other draws it evenly.
The energy charge bills volume: every kilowatt-hour that passes through the meter, at a per-kWh rate. The demand charge bills intensity: the single highest kilowatt reading in the period, at a per-kW rate. Reducing total consumption lowers the energy charge. Only reducing the height of your peak lowers the demand charge.
ATCO Electric and FortisAlberta apply demand charges to commercial accounts in their distribution territories. According to the Utilities Consumer Advocate, ENMAX Power Corporation and EPCOR Distribution and Transmission do not apply demand charges to small business customers, though larger commercial and industrial accounts on interval metering can still be affected regardless of distributor.
No. Demand charges are set by your distribution company, and your distributor is determined by where your facility is located, not by which retailer you buy energy from. Switching retailers changes your energy rate. It does not change the demand charge line on the bill.
Two reasons are common. Some rate schedules bill on contracted demand or a rate minimum rather than the month's actual reading, and some carry a ratchet provision that holds your billing demand at a percentage of an earlier peak for months afterward. In both cases a quiet month does not produce a low demand charge.
