Learn
Commercial electricity, explained properly
The mechanics that actually determine a commercial electricity bill — demand charges, ratchets, load factor, rate schedules, capacity allocation and contract structure. Written for someone who has to make a decision, not for someone being sold to.
A commercial electricity bill is determined by more than a rate: demand charges bill the peak rather than the total, ratchet clauses carry a past peak forward, rate schedules assume a load shape, and capacity allocation in some markets is set by a handful of hours. These mechanics decide what is worth doing.
Start here
If you read one thing, read the first. It is the distinction the rest of this site is built on.
Supply vs delivery
Almost every conversation about lowering a commercial electricity bill starts in the wrong place, because it treats the bill as one negotiable number. It is two, and only one of them is negotiable.
Demand charges
Two businesses can consume identical electricity in a month and receive very different bills. The difference is demand, and it is the line most commercial operators have never had explained to them.
Load factor
It costs nothing to calculate, it takes two numbers off your own bill, and it tells you which half of your bill is worth attacking before you spend a minute on anything else.
Rate schedules
This is the one finding that requires no supply market, no contract and no negotiation — and it is therefore the one nobody in the industry has a commercial reason to tell you about.
Deep technical
Mechanics that carry real money and are rarely explained, because the party best placed to explain them earns nothing from doing so.
| Article | What it covers | Applies to |
|---|---|---|
| Supply vs delivery | A commercial electricity bill splits into supply, which a competitive supplier can price, and delivery, demand and fixed charges, which stay regulated. Knowing which is which determines what is worth doing. | All markets |
| Demand charges | A demand charge bills the highest rate of electricity draw in a period, usually measured over a 15-minute interval and charged in dollars per kilowatt. It is set by regulated tariff and no supplier can change it. | All markets |
| Ratchet clauses | A demand ratchet bills on the greater of the current period peak and a percentage of a trailing peak, so a single high interval can set a billing floor for months afterwards. | All markets |
| Load factor | Load factor is consumption divided by peak demand times hours in the period. It determines whether demand charges or supply price dominate a commercial electricity bill. | All markets |
| Rate schedules | Utility rate schedules are built around assumed load shapes. An account on the wrong one pays more for identical electricity, and correcting it requires no supplier and works in regulated states. | All markets |
| How to read a commercial electricity bill, line by line | What each section of a commercial electricity bill means, which numbers matter, and what to check before assuming anything is correct. | All markets |
| How a commercial electricity supply price is actually assembled | The components that make up a retail commercial electricity supply price: energy, capacity, transmission, ancillary services, losses, shaping, compliance and margin. | All markets |
| ERCOT 4CP | In ERCOT, transmission cost for large commercial accounts is allocated by demand during the peak 15-minute interval of each summer month. Four intervals determine the following year of charges. | Texas |
| PJM capacity tags | In PJM, a commercial account’s capacity charge is set by its Peak Load Contribution, derived from demand during the highest system peak hours of the prior summer. | PJM |
Core explainers
| Article | What it covers |
|---|---|
| kW vs kWh | A kilowatt is a rate of electricity draw. A kilowatt-hour is a quantity consumed. Commercial bills charge for both, separately, and confusing them leads to the wrong cost decisions. |
| Power factor | Power factor is the ratio of real power to apparent power. Many commercial tariffs penalise accounts below a threshold, and the charge is easy to miss on a bill. |
| What happens when a commercial electricity contract expires unmanaged | When a commercial supply contract expires without action, the account typically rolls to a holdover rate, an automatic renewal or default service — all decided by the contract rather than by negotiation. |
| Fixed, index and block-and-index | The three common commercial electricity contract structures, what risk each one transfers, and which questions determine the right choice for an account. |
| Pass-through clauses | Pass-through clauses let a supplier charge certain costs through to the customer even under a contract described as fixed. Which components are passed through varies by supplier and is the main reason two quotes are not comparable. |
| Interval data | Interval data records consumption in short increments rather than monthly totals. It is usually available from the utility on request and it changes what analysis is possible. |
Looking up a word from a bill or a tariff? The glossary defines 52 terms in plain language and points to the guide for each.
Why this tier exists
Not to rank for anything in particular. It exists because the accuracy positioning this site takes is only credible if the expertise behind it is visible, and because a business making a decision worth tens of thousands of dollars deserves the mechanics explained rather than summarised into a call to action.
Every article states its formulas, flags what varies by utility or market, and says where a figure must be read from your own tariff rather than taken from a page.