Understanding Demand Charges

PSNH's demand charge covers the costs associated with maintaining sufficient electrical facilities at all times to meet each customer's highest demand for energy. It is based on the greatest amount of electricity used by the customer in any half-hour period during the billing period.

The demand charge is expressed as a dollar per kilowatt (kW) rate and is applied to the customer's maximum kW demand, or the highest rate at which the customer required energy during the month. PSNH customarily averages a customer's instantaneous demands over one-half hour intervals throughout the month. Consequently, a customer's monthly demand is the highest one-half hour of energy use during a billing cycle.

For example, a customer using 1,000 kW over half an hour uses the same amount of energy as a customer using 500 kW over one hour. Both ultimately used 500 kWH, but the first customer demanded his 500 kWh at a rate of 1,000 kW per half hour. The second customer demanded his 500 kWh at a rate of 500 kW per half hour over a longer period of time. The first customer's demand - or rate at which that customer requires the electric energy to be delivered - was twice that of the second customer.

While both customers are charged for 500 kWh of energy, it costs PSNH more to serve the higher-demand customer, since the company must have facilities in place to serve the higher demand at any given moment The demand charge reflects this higher cost and provides an incentive for customers to manage their loads to lower their demand.