The short version
Electricity is measured two ways at the same time: how much you used all month, and how hard you pulled at your single worst moment. Rates can charge for either, or both.
Electric
kWh — the kilowatt-hour. Energy. The total amount you used over the month. This is the odometer.
kW — the kilowatt. This is demand: how fast you were drawing power, at the highest point in the month. This is the speedometer, and the bill only records its highest reading. In practice the meter takes the average over every fifteen minutes and keeps the biggest one.
Why the utility charges for a moment you only had once: everything between the power plant and the building — the wires, the transformer, the substation — has to be big enough for your worst moment. It sits there sized for that moment all year, whether you use it or not. The demand charge pays for the size of the equipment. The energy charge pays for what flowed through it.
Step 1
Two shops use exactly the same energy in a month.
Step 2
One pulls a little, all day long.
Step 3
The other pulls everything at once.
Step 4
The equipment has to fit the biggest moment.
Step 5
Gas and water measure volume, then convert.
Load factor
The word for how flat a customer is. High load factor means flat, and flat customers usually do well on rates that charge for demand, because the demand charge is spread over a lot of energy. Low load factor means spiky, and spiky customers usually get hurt by them. You do not need to calculate it by hand, but you should be able to look at twelve months and say “this one is flat” or “this one is spiky”.
Voltage level
Where the customer connects: secondary (the normal case, the utility owns the transformer), primary (the customer owns their own transformer and takes higher-voltage service), or transmission (very large industrial). This decides which rates they are allowed to take, so you have to know it before you compare anything.
Words you will see and can park for now
kVA, power factor, ratchet, on-peak and off-peak, coincident peak. Recognise them, do not chase them yet. Two of them come back in later lessons.
Gas
The meter measures volume — CCF (one hundred cubic feet) or MCF (one thousand). The bill charges for heat — therms (one therm is 100,000 BTU) or Dth (ten therms). A conversion factor printed on the bill does the translation, and it moves slightly month to month because the gas itself varies. If your arithmetic on a gas bill is close but not exact, that factor is usually why.
Water and sewer
- Volume is billed in gallons or in CCF. We use 1 CCF = 748 gallons.
- Meter size drives the fixed monthly charge, and often decides which rate applies at all. On a water bill it matters as much as the rate code.
- Sewer is usually billed from the water meter reading. The assumption is that everything you took in went back out.
- EDU — equivalent dwelling unit. One home’s worth of sewer flow. A building is assigned a count of EDUs from its fixtures, floor area, meter size or business type, and then billed a flat charge per EDU. It is not a meter reading. You will see lines like “Sewer: 4 EDU × $38.00”. Also written ERU or SFE.
The EDU count is set once, when the building connects, and is very rarely revisited. A building that changed use, shrank, or was assessed generously twenty years ago can be paying for flow it does not produce.
The one thing to remember
kWh is what you used. kW is how hard you pulled. A rate can charge for one, the other, or both — and that choice is most of the game in electric.
Check yourself
Two customers both used 10,000 kWh last month. Can their bills differ a lot?
Yes. If one has a much higher peak kW, and the rate charges for demand, that customer pays substantially more for identical energy.
What is a utility actually paying for with a demand charge?
The size of the equipment it had to install and keep available for the customer’s worst moment, not the energy that flowed through it.
A sewer bill shows a flat charge and no volume. What is probably driving it?
An EDU count — a fixed number of dwelling-unit equivalents assigned to the building, billed at a rate per unit.
Would a flat, steady load or a spiky one usually do better on a demand rate?
The flat one. Its demand charge is small relative to the energy it buys.