The short answer
Demand charge ($/kW) is often 30–50% of a commercial bill.
A commercial electricity bill is structurally similar to a residential bill but introduces two new line items that often dominate: the demand charge (a $/kW fee on the highest 15-minute peak in the billing month) and the capacity tag (a kW-block reservation set once a year and locked for 12 months). This guide walks every line on a typical commercial bill, the relative weight of each, and which ones can be reduced by procurement vs which require operational change.
The supply line — kWh times rate, the procurement lever
The supply line on a commercial bill is the same structure as residential — kWh × per-kWh supply rate — but the absolute dollars are larger. On a 22 MWh-per-month account, the supply line typically runs $2,500–$3,200 at default rates.
Switching to a competitive supplier and locking the rate is the procurement lever. The deltas are larger because the volumes are larger; a 13.4% reduction on a $3,000 supply line is $400/mo, $4,800/yr, $9,600 over a 24-month lock.
Infographic
Cumulative supply-side savings on a $4,800/mo commercial bill
The demand charge — the operational lever
The demand charge is a $/kW fee on the highest 15-minute kW peak in the billing month. On a 540-kW peak account, a $3.00/kW demand charge runs $1,620/mo. The supplier does not bill the demand charge — the utility does, on the delivery side of the tariff.
Reducing the demand charge requires operational change: staggering HVAC and heavy equipment startup, peak shaving via behind-the-meter storage, or shifting production to off-peak hours. Procurement cannot directly shop the demand charge.
A single bad afternoon — every piece of equipment running simultaneously for one 15-minute window — can lock in 12 months of high demand if it sets the capacity tag.
Infographic
Pre-shave vs post-shave 24-hour demand curve
The capacity tag — the once-a-year compounder
The capacity tag is a kW-block reservation set once a year by the regional grid operator. It is based on your account's contribution to the previous summer's system peak, weighted across the five highest peak hours of the year. The tag locks in for the next 12 months.
A bad summer (every piece of equipment running during the system peak hour) can lock in a high capacity tag for the entire next year. The capacity charge then flows through to the delivery side of the bill at a higher monthly rate.
For commercial accounts, capacity-tag management is one of the highest-leverage operational programs available. The savings can compound year over year.
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