Understanding Peak Demand Charging

If you were under the impression that your home’s electricity bill is straightforward and easy to understand… you must not be living in Arizona! With peak demand charging, your Maricopa or Pinal County energy bill can leave you scratching your head, trying to figure out how you used all that electricity, or why it cost you an arm and a leg.

Actually, peak demand charges aren’t just about the total amount of electricity your home used over the course of the last month—but when you used all that electricity factors heavily as well. Still a little confused? Today, the solar energy experts at SouthFace Solar will help you understand how this utility rate structure works, and in our next blog, we can offer a money saving residential solar solution for your Phoenix or Mesa area home.

What is Demand Charging?

When utilities like APS and SRP calculate the amount of money you owe for electricity used in your home, they don’t use a flat rate. For time of use rate structures, everyone is charged the same higher rate during specific ‘peak’ times of day where grid-wide electricity demand is high like in the afternoons or early evenings. Under a demand charge or even a time-of-use demand charge, the utility companies can charge you more per kWh when you’re using the most electricity during peak hours of the day. The time of day for demand charges can change from person to person, and are intended to incentivize homeowners to spread out their energy use.  Utility companies in Arizona offer various rate plans, so it might be complicated to know what plan is best and how to choose, which plan will save you the most money based on your energy habits.

How Does Peak Demand Charging Work?

For example, let’s say your home uses 1,000 kWh in a given month. With a flat rate structure, you’d pay the same rate for all 1,000 kWh. With a time of use rate structure, you’d pay different rates depending on the time of day the electricity was used based on set peak hours determined by that utility like from 3:00pm to 8.00pm (and this could also change by the season). But with demand charging, you’ll pay a higher rate for your top electricity usage, particularly during a peak period, and a lower rate when you use a little.

So, a homeowner who uses no electricity all morning and afternoon, but decides to crank up their AC, do their laundry, and run their dishwasher all at the same time every day in the evening will be faced with a much higher utility bill than someone who uses the same amount of total electricity but does their laundry in the morning and their dishes overnight, being careful not to run multiple appliances at the same time.

Simplify Your Home Energy Usage with SouthFace Solar

Demand charging is intended to relieve stress on the electrical grid, as Arizona homeowners tend to use the most power during similar times of day. But in reality, it can be a real hassle to adapt your schedule, and the financial penalties for forgetting can be severe.

Not interested in keeping a running spreadsheet just to make electricity affordable in your home? As one of the leading solar companies in AZ, we aren’t either, which is why Arizona solar ownership with SouthFace Solar is one of the best ways to avoid your puzzling monthly energy bills. With grid-tied solar panels for your Arizona home, you’ll only be using some of that energy from the grid, during times when your panels aren’t producing enough electricity to power your home

And yet, there is a way to go even further and maximize the benefit from your solar energy system to avoid expensive peak demand charges all together: solar battery storage! Look forward to Part 2 of this blog series where we’ll explain how solar batteries for your home can help you gain true energy independence and power your home with 100% renewable energy from the sun!

Tired of high utility bills and complex demand charging rate plans? Call 480-405-6105 or contact us and find out how you can save by upgrading your home to solar.