Load factor: the one division that tells you where your money is

The dashed line is each account's peak — the figure the demand charge is billed on. Both shapes enclose the same area, which is the consumption. Same kWh, very different bills, and a completely different list of things worth doing.

The calculation

loadFactor = kWh / (peakKW x hoursInPeriod)

Use 730 hours for a typical month, or multiply the exact days in the billing period by 24 for precision. An account using 100,000 kWh with a 400 kW peak over a 730-hour month has a load factor of 34 percent.

The calculator does this and interprets the band.

What it actually measures

Load factor is the share of your theoretical maximum consumption that you actually used. An account running flat out every hour of the month would be at 100 percent. An account that hits a high peak briefly and otherwise sits idle would be in the low single digits.

Framed differently: it measures how efficiently you are using the capacity the utility has reserved for you. A low load factor means the utility built for a peak you rarely use, and the demand charge is how it recovers that.

Reading the bands

These bands are interpretive guidance for prioritising work, not a tariff rule. They are documented on the methodology page.

• Under 20 percent — very low. Short, sharp peaks against low overall consumption. Demand charges usually dominate. A demand-metered schedule is often a poor fit.
• 20 to 40 percent — low. Peaky usage. Demand charges are typically a large share of the bill, and rate schedule fit is worth checking before any supply conversation.
• 40 to 60 percent — moderate. Mixed profile. Both the supply rate and the demand structure matter.
• 60 to 80 percent — high. Steady consumption. The supply rate carries most of the controllable cost.
• Over 80 percent — very high. Near-continuous load. Contract structure and timing dominate; demand management has less to work with.

Why this reorders the advice

A low load factor account that switches supplier to chase a better supply rate has optimised the smaller half of its bill and left the growing half alone. A high load factor account that spends six months on peak management has done difficult work for very little, because there was not much peak to remove.

This is why generic advice fails in this category. The same recommendation — switch suppliers — is given to both, because switching is the action that pays a commission. Load factor is the two-minute check that tells you whether it applies to you.

Load factor and rate schedule fit

Utility rate schedules are designed around assumed load shapes. A schedule with a high demand charge and a low volumetric rate suits a steady, high load factor consumer. A schedule with a low or no demand charge and a higher volumetric rate suits a peaky, low load factor one.

An account whose shape has drifted from the schedule it sits on pays more for identical electricity. Because both your usage and the alternative tariffs are publicly available, this is checkable and verifiable — and it requires no supplier.

Cautions

A single month can mislead. A seasonal operation shows a very different figure in August than in February, and the annual picture is what determines rate schedule fit. Twelve months of readings is the standard.

And if your bill shows no kilowatt figure, the account is not demand-metered and load factor cannot be calculated from the bill alone. That is a finding in itself: demand charges are not currently part of your cost.

Common questions

How do I calculate load factor?

Divide the period kilowatt-hours by the peak kilowatts multiplied by the hours in the period. Use 730 hours for a typical month. Express the result as a percentage.

What is a good load factor for a commercial building?

It depends on the operation rather than on a universal target. Below about 40 percent, demand charges usually dominate and rate schedule fit is the priority. Above about 60 percent, supply price and contract structure carry most of the controllable cost.

What does a low load factor mean?

That the account draws a high peak relative to how much it consumes overall. Demand charges are typically a large share of the bill, and the account may be on a rate schedule designed for a steadier consumer.

Related