DEMAND CHARGES EXPLAINED

Florida Commercial Demand Charges Explained (2025)Why You're Paying 30-40% Extra (And How to Stop)

💡 The Simple Answer

• What they are: Charges based on your peak power usage (highest 15-min interval each month)
• Why they exist: Utilities must build infrastructure for your peak demand, not average usage
• Typical cost: $8-$15 per kW of peak demand (30-40% of total bill)
• The problem: One 15-minute spike can cost you all month
• The opportunity: Reduce peak by 20-30% = save $500-$5,000/month
• How to reduce: 8 proven strategies (load shifting, efficiency, controls, storage)

📅 Updated: February 2025•⏱️ 15 min read•✅ Duke, FPL & TECO

Most Florida businesses don't understand demand charges—yet they account for 30-40% of every electric bill. That $12,000 monthly bill? About $3,600-$4,800 is demand charges alone.

Here's the frustrating part: Your peak demand is measured in just one 15-minute interval per month, but you pay for it 720 hours straight (the entire month). A single spike—equipment starting up, all AC units running simultaneously, a production rush—can cost you thousands of dollars that month.

💰 Real Example: Tampa Manufacturing Facility

Company: 45,000 sqft manufacturing, Tampa (TECO customer)

Monthly usage: 85,000 kWh

Average demand: 118 kW

Peak demand: 187 kW (one 15-minute spike when all equipment started)

Energy charges: 85,000 kWh × $0.095 = $8,075

Demand charges: 187 kW × $12.50 = $2,338

Total bill: $10,413

Demand % of bill: 22.5%

After implementing demand management:

New peak demand: 142 kW (24% reduction through load shifting)

New demand charges: 142 kW × $12.50 = $1,775

Monthly savings: $563 ($6,756/year)

Implementation cost: $8,400 (controls + staff training)

Payback: 15 months

This guide explains exactly what demand charges are, how Duke Energy, FPL, and TECO calculate them differently, and 8 proven strategies to reduce your peak demand by 20-40%.

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⚡What Are Demand Charges? (Simple Explanation)

Your electric bill has two main components:

1. Energy Charges (kWh)

What it is: Total electricity consumed over the month

How it's measured: Kilowatt-hours (kWh)

Typical rate: $0.08-$0.12 per kWh

Example: Use 100,000 kWh × $0.10 = $10,000

2. Demand Charges (kW)

What it is: Highest power usage in any 15-min period

How it's measured: Kilowatts (kW) of peak demand

Typical rate: $8-$15 per kW

Example: Peak 200 kW × $12 = $2,400

🎯 The Key Insight

Energy charges reward you for using less electricity overall. Demand charges penalize you for using too much power at once—even if it's just for 15 minutes one time during the month.

The 15-Minute Rule

Florida utilities measure your power usage every 15 minutes throughout the month. Your highest 15-minute average becomes your peak demand for billing.

Example Month Timeline:

• Most of month: 80-120 kW usage (normal operations)

• July 15, 2:30 PM: All AC units + production equipment running = 185 kW for 15 minutes

• Rest of month: Back to 80-120 kW

• Your demand charge: Based on 185 kW (the spike)

• You pay: 185 kW × $12 = $2,220 for the ENTIRE month

• The frustration: That 15-minute spike costs you $2,220 for 720 hours straight

Why Do Utilities Charge for Demand?

It's about infrastructure. Utilities must build power plants, transmission lines, and substations large enough to handle everyone's peak demand simultaneously—not average usage.

The Utility's Problem:

• Power plants must be sized for peak demand, not average
• Transmission lines must handle maximum current
• Transformers sized for highest simultaneous load
• Equipment sits idle most of the time but must be ready
• Capital costs are enormous ($billions for infrastructure)

Your Impact:

• Your average demand: Maybe 100 kW
• Your peak demand: 180 kW (one spike)
• Utility must build for: 180 kW capacity
• That extra 80 kW capacity: Sits unused 99.9% of time
• But it still cost millions: You help pay for it

💡 The Utility's Perspective

If every business flattened their demand curve (same usage 24/7 vs spiky), utilities could serve 30-40% more customers with the same infrastructure. Demand charges incentivize load flattening.

Demand Charge Rates: Duke vs FPL vs TECO

Each Florida utility structures demand charges differently. Understanding your specific utility's rates is critical to calculating savings potential.

Utility	Demand Rate	Billing Method	Notes
Duke Energy FL	$11.50-$13.20/kW	15-min intervals	Varies by rate class
FPL	$9.80-$14.50/kW	15-min intervals	TOU rates available
TECO	$10.25-$12.80/kW	15-min intervals	On-peak vs off-peak

8 Proven Strategies to Reduce Demand Charges

1. Load Shifting & Scheduling

Avoid running high-power equipment simultaneously. Stagger equipment startups, production schedules, and HVAC cycles to flatten demand peaks.

Example: Restaurant runs dishwashers during off-peak hours instead of dinner rush. Peak drops from 145kW to 118kW. Savings: $337/month.

2. Demand Management Controls

Install automated systems that monitor real-time demand and shed non-critical loads when approaching peak. Modern systems cost $5k-$20k but can reduce peaks 15-25%.

Example: Office building installs demand controller. System automatically raises thermostats 2°F and dims lights when approaching peak. Savings: $890/month, 11-month payback.

3. Equipment Right-Sizing

Replace oversized equipment with properly-sized alternatives. Oversized motors, compressors, and HVAC units create unnecessary demand spikes.

Example: Warehouse replaces 60HP oversized air compressor with 40HP variable-speed unit. Peak drops 28kW. Savings: $336/month.

Additional Strategies:

4. Soft Starters & VFDs

Reduce motor startup spikes by 50-70%

5. Power Factor Correction

Improve power factor to reduce apparent demand

6. On-Site Generation

Solar + storage to shave peaks during high-demand periods

7. Energy Storage (Batteries)

Deploy batteries during peak demand events

8. Behavioral Changes

Train staff to avoid simultaneous equipment usage

Frequently Asked Questions

Can I eliminate demand charges completely?

No, but you can reduce them 20-40%. Unless you switch to a residential rate (not available for most commercial customers), you'll always have demand charges. However, through load management, controls, and equipment optimization, most businesses can reduce peak demand by 20-40%, translating to $500-$5,000/month in savings.

Is solar effective at reducing demand charges?

Partially. Solar reduces demand charges only when the sun is shining AND your peak occurs during solar production hours. If your peak is at 6 PM or on cloudy days, solar won't help. Solar + battery storage is much more effective for demand reduction, but adds $30k-$100k+ to system cost.

How does PowerAuditor.ai help with demand charges?

PowerAuditor.ai analyzes your bill to:

• Identify exact demand charge amounts
• Calculate your effective $/kW rate
• Compare your peak to average demand
• Estimate savings from 10-40% peak reduction
• Recommend specific strategies for your business type
• Show ROI on demand management investments

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