What is a demand charge on a Texas business electricity bill?
A demand charge is a charge for how much power your business pulls at once, not how much electricity it uses over the month. Your utility measures your highest 15-minute peak each month. Above a certain peak, that number becomes its own line on the bill.
Energy use and peak demand are different things
Your kWh total is how much electricity you used all month. Demand is how hard you pulled on the grid in your busiest 15 minutes.
Two businesses can use the same kWh and get different bills. One runs equipment steadily all day. The other switches everything on at once for short bursts. The second has a higher peak, so it pays more in delivery charges — even though the kWh total matches.
Oncor measures demand in kW. CenterPoint measures it in kVA. kVA is close to kW, but not the same: it also counts a kind of electrical load called reactive power. Don't treat a kW number as a kVA number.
Who pays demand charges
These rules cover the common "secondary service" business accounts. Other service classes have their own rules.
| Utility | Lower class | When you move to the demand-charge class |
|---|---|---|
| CenterPoint (Houston area) | Peak at or below 10 kVA, and no month above 10 kVA in the previous eleven | One month above 10 kVA moves you to the higher schedule for at least twelve months |
| Oncor (Dallas–Fort Worth area) | Peak at or below 10 kW | Three months above 10 kW in a rolling year, or any single reading above 12 kW, moves you the following billing month |
Oncor's rule changed on June 1, 2026. One high month no longer moves you. Check the current tariff rather than an older explanation.
Getting back to the lower class
Oncor: twelve consecutive billing months with no reading above 10 kW, then you move back the following month.
CenterPoint: the current month and the previous eleven must all be at or below 10 kVA, and you must have served at least twelve months on the higher schedule.
Being in the demand-charge class does not mean paying the same demand amount every month. The measured peak, the "billing demand" the utility uses for each charge, and your rate class are three separate things. Ask your provider which number drives each line.
Find the peak, not just the kWh total
Look for a line labeled demand, kW or kVA. Check the unit and the billing dates. Ask whether the number is your measured peak or the billing demand used to calculate the charge.
Your provider may bundle delivery into one line or show it separately. Oncor warns that provider bills show charges differently. One delivery subtotal does not mean there's no demand charge inside it.
If the bill shows no peak, ask your provider for the utility's measured peak, billing demand and delivery rate class. Keep old bills — getting back to the lower class depends on earlier months.
What to ask before you choose a plan
Ask for the energy price, recurring fees, how delivery is handled, and how any demand charge is calculated, in writing. Ask whether the quoted total includes demand or leaves it extra, and ask for an estimate using your own usage and demand history.
For small commercial customers, PUCT rules require the terms of service to describe the demand charge and how it applies, if there is one.
On AskTexasEnergy, a price under your utility's demand threshold is all-in: energy, delivery and fees. Over it, we show energy plus delivery and mark demand charges as extra. We never present a demand-billed price as a complete bill.
Frequently asked questions
Q: Is a demand charge the same as a kWh charge?
A: No. A kWh charge is for total energy used. A demand charge is for your highest power draw in a 15-minute period.
Q: Does one brief equipment start set my bill?
A: Not by itself. Demand is averaged over 15 minutes, not an instant spike. Other tariff rules can also affect the billing calculation.
Q: Does crossing 10 kW once move an Oncor account?
A: Not under the current tariff. It takes three readings above 10 kW in a rolling twelve months, or one reading above 12 kW. The move happens the next billing month.
Q: Will changing providers remove utility demand charges?
A: No. Demand charges come from your utility's tariff and your meter history, which don't change when you switch. What changes is the energy price and how the provider passes delivery through.
Q: Can I compare demand-billed plans using only a cents-per-kWh price?
A: No. Compare energy plus delivery plus the demand charges, using your own demand history. A per-kWh number alone leaves part of the bill out.
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