The short answer
Demand charge = highest 15-min kW peak in the billing month.
Demand charges are the single biggest commercial line item Seenra cannot directly shop. They are a $/kW fee on the highest 15-minute kW peak in the billing month, set by the utility tariff and approved by the PUC. Reducing the demand charge requires operational change at the meter — staggering equipment startup, peak shaving via storage, or shifting production to off-peak hours. This guide walks through the practical playbook facilities teams use to flatten the peak.
How the demand charge actually works
The demand charge is calculated as: highest 15-minute average kW in the billing month × $/kW tariff rate. On a 540 kW peak account at $3.00/kW, that is $1,620/mo.
The 15-minute window matters. The utility meter records average kW in 15-minute intervals; the highest interval in the month sets the demand charge. A single bad afternoon — every piece of equipment running simultaneously for one 15-minute window — can lock in the entire month's demand charge.
The demand charge does not move with consumption. A facility can use 22 MWh in a calm month or 22 MWh in a peaky month and pay the same supply line, but radically different demand charges.
Staggering — the simplest, highest-leverage operational change
The cleanest demand-charge reduction is staggering equipment startup. Instead of every HVAC unit, every compressor, and every heavy machine starting at the same time at 8:00 AM, stagger them in 5-minute increments across 30 minutes.
A 30-minute staggered startup typically reduces the morning peak by 20–30%. Combined with afternoon staggering on the heaviest production runs, the total demand-charge reduction can hit 25–40%.
No capital investment required — just a sequencing logic change in the building automation system or the production scheduling.
The capacity tag — a once-a-year compounding penalty
On top of the monthly demand charge, the capacity tag is 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.
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 12 months.
Capacity-tag management is one of the highest-leverage operational programs available because the savings compound. A 10% reduction in the capacity tag flows through every month of the next 12.
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About the author
Harry ParkerEnergy Consultant, Seenra Inc
Energy Consultant at Seenra Inc. Harry advises US commercial buyers and households on supplier procurement, multi-site aggregation, and the operator-level math behind locked-rate contracts. Eight years on the buy side across PJM and ERCOT zones — he has run the load profile, the reverse auction, and the renewal calendar for portfolios from 50 kW restaurants to 18 MW manufacturing campuses.