For many commercial electricity users, energy invoices are filled with terms that seem interchangeable. But one of the most important distinctions is between supply charges and demand charges. These two components can have a significant impact on your overall cost - and knowing how they work can help you make smarter decisions and avoid surprise fees.

Let’s break it down in plain terms.

First, why do these charges exist?

Electricity isn’t just about how much energy you use; it’s also about how much you use at once.
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Utility companies and electricity suppliers need to ensure there’s enough energy available to meet your needs at any given time. Supply and demand charges reflect the cost of delivering power and the infrastructure needed to support it, especially during peak periods of usage.
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For businesses with larger operations or equipment running at high intensity, these two charges can have a big effect on monthly energy costs.

What are supply charges?

Supply charges are the cost of the actual electricity your business uses over time, measured in kilowatt-hours (kWh). This is the energy you consume to run equipment, power lighting, heat or cool your facility, and more.

• Think of this as how much energy your business uses over a specific period of time.
  
  
• These charges are typically billed by your electricity supplier, and the rate may be fixed or variable depending on your contract.
  
  

Tip from Arise Energy: Shopping the market for competitive supply rates is one of the most effective ways to control this part of your bill. That’s where our marketplace comes in - helping you compare suppliers and lock in a rate that fits your strategy.

What are demand Charges?

Demand charges are based on your business’s highest level of electricity use at any one time, measured in kilowatts (kW). This shows your peak demand, or the biggest “energy rush” your facility requires (usually in a 15- or 30-minute window).

• Think of this as how much energy your business uses at a specific moment in time, not just how much.
  
  
• These charges are typically determined by your local utility, not your supplier.
  
  
• Demand charges help the utility maintain enough infrastructure, like transformers and distribution lines, to serve your peak usage needs.
  
  

Businesses with large equipment, HVAC systems, or variable usage patterns can have high demand charges even if total energy use is moderate.
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Why this matters for your business

Understanding supply and demand charges helps you:

• Identify cost-saving opportunities: You may be able to reduce usage during peak times to lower demand charges, or shop for a better supply rate to reduce per-kWh costs.
  
  
• Improve energy efficiency: Knowing how your energy is used and when helps guide smarter equipment scheduling and investment in energy-saving systems.
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• Forecast costs more accurately: Businesses that understand their usage profile can budget more effectively and avoid billing surprises.

Stay informed and stay ahead with Arise Energy's digital marketplace

What makes us different?

• Direct access to top-tier suppliers: Easily compare quotes, with transparent pricing, so you can make better choices faster.
• Custom, up-to-date quotes: Automated refreshes ensure your business has real-time access to the most competitive rates.
• Clear recommendations: Our smart tech evaluates customers’ needs to deliver data-driven recommendations to empower informed decisions.
• One simple dashboard: Manage all your contracts digitally. No spreadsheets. No hassle.