Demand Charges

Every customer is charged for the amount of electricity they use.  Usage is calculated in kilowatt hours (kWh).  For example, a light fixture that burns one kilowatt (that's 1,000 watts) of electricity for 8 hours would use 8 kWh.  Supplying that energy requires, at all times, sufficient electrical facilities to meet each customer's highest demand for power. 

The demand charge is expressed as a dollar charge per kilowatt (kW) and is applied to a customer's maximum kW demand.  NES averages the customer's instantaneous demands over each half hour interval throughout the monthly billing cycle.  The charge is based on the highest one-half hour of power used during that month.

For example, Customer A starts a machine that consumes 1,000 kW and runs it for half an hour, while Customer B has a machine that consumes 500 kW and uses it for an hour.  Both ultimately used 500 kWh, but Customer A demanded his 500 kWh at a rate of 1,000 kW per half hour.  Customer B demanded his 500 kWh at a rate of 500 kW per half hour over a longer period of time.

While both customers are charged for 500 kWh of energy, Customer A is charged for 1,000 kW of demand.  Customer B is charged for only 500 kW of demand.  It's more costly to serve the higher-demand customer because facilities have to be in place to serve the higher demand at any given moment.