Electric Demand Charge

Commercial power distribution costs in Texas / Oklahoma. Below is a simple explanation of how these costs are calculated on your electric bill.
In addition to your electricity rate Texas & Oklahoma charge for power distribution otherwise known as demand charges. Since a lot of our clients are big power users these costs can be significant but are usually not a problem for businesses who understand how they are being charged. Even with demand distribution charges overall power is still much cheaper than states like California or New York.


Demand charges are relatively fixed aside from “rachet” charges that can carry over several months. Rachet charges can be a problem for businesses who do not sustain demand throughout the year. If you understand how this works you can accurately plan your yearly electric bill. Lets use a simple example.

  • Texas New Mexico Power charges $10/kW.
  • Your operation peaks at 80kW for more than 15 minutes your max demand will be set to 80kW
  • Demand charge will be $10/kW x 80kW = $800/mo
  • Actual demand charge is 80% of this rate = approx $640.00/mo


The rachet charge will hold for 11 months after the demand is set. If you ramp down operations after this demand you organization will then incur rachet charges which based on the example above is a consistent demand charge of $640/mo for the remaining rachet months. Sustaining demand is a better option because its not very efficient to lower your energy usage and still pay demand charges. Its a shame but “rachet” charges do NOT promote renewable energy or energy efficiency so spending money to lower your energy usage will NOT save your business money. The power companies will still charge you the same demand charge for up to one year. In the end it will cost more for the business to try and become efficient. If your demand is high and then you ramp down operations its better to try and talk with Texas New Mexico Power about resetting your demand meter to zero but this is usually a difficult request. Residential customers do not incur rachet charges but monthly electricity rates are much higher.

Updated: 04/23/2019 — 10:55 am

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