Do small businesses pay demand charges?

Most don't. Demand charges typically apply to accounts above 10 kW peak (varies by TDU rate class). Most retail and office tenants stay under that threshold and get billed on flat per-kWh rates.

Can I negotiate the demand rate?

The TDU's demand rate is set by tariff and can't be negotiated. The REP's margin is negotiable for large commercial accounts, but the demand component pass-through is fixed.

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Business · Demand charges

Demand Charges Explained — Texas Commercial Electricity

For most residential accounts, the bill is simple: rate × kWh used + a base fee. Commercial accounts above ~10 kW peak demand introduce a demand charge — a separate line item based on your highest 15-minute peak in the billing cycle.

Updated May 2026 Enri Zhulati 2 min read

Enri Zhulati 2 min read 239 words

How demand is measured

Your TDU records demand in 15-minute intervals. The single highest interval reading in the billing month sets your demand charge for that month, multiplied by the demand rate (typically $5-$25/kW depending on TDU and rate class).

Why demand charges hurt

A facility that runs steady at 50 kW most of the time but peaks at 200 kW for one 15-minute window during a startup gets charged at 200 kW. On a $10/kW demand rate, that single peak adds $1,500 to the bill — even though average usage was 50 kW.

How to manage demand

Peak shaving (shifting non-essential loads off-peak), demand controllers (automated load curtailment), battery storage (discharge during projected peaks), and process scheduling (stagger HVAC and equipment startups) are the big four. Many large commercial accounts hire energy management consultants for this specifically.

The Bottom Line

Talk to a commercial advisor

Frequently asked.

Do small businesses pay demand charges?: Most don't. Demand charges typically apply to accounts above 10 kW peak (varies by TDU rate class). Most retail and office tenants stay under that threshold and get billed on flat per-kWh rates.
Can I negotiate the demand rate?: The TDU's demand rate is set by tariff and can't be negotiated. The REP's margin is negotiable for large commercial accounts, but the demand component pass-through is fixed.

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Independently researched. Every claim is verified against primary sources (PUCT, ERCOT, EFLs).
No paid placement. Rankings are never influenced by advertising or referral compensation.
Reviewed by Enri Zhulati, Consumer Advocate. Plan data is pulled live from the electricrates.org API on every build and cross-checked against the EFL each REP publishes.

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Enri Zhulati

Consumer Advocate

Enri knows the regulations, the fine print, and the tricks some retail electricity providers use. He's spent nearly a decade learning how to spot hidden fees, misleading teaser rates, and contracts that sound good but cost more. He writes the guides that show you what they're hiding — his goal is to help Texans avoid the traps and find plans that actually save money.

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Sources

Public Utility Commission of Texas (PUCT) — Commercial Rate Filings
Electric Reliability Council of Texas (ERCOT) — Wholesale Market Reports
U.S. Energy Information Administration (EIA) — Texas Industrial Electricity Data
ComparePower.com — Real-Time Plan & Rate Database

Sources are cited for informational purposes. Data may have been updated since publication.

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