BILLDECODER GUIDE
Demand charges are fees on your electricity bill based on the single highest spike in your electricity use during a billing period. Unlike usage charges — which measure how much electricity you use over time — demand charges measure the maximum rate at which you used electricity at any single moment. One 15-minute peak is all it takes to set your demand charge for the entire month.
For many Australian small and medium businesses, demand charges make up 30–50% of the total electricity bill. Despite this, most business owners have never heard of them, because bills don't explain what they are or why they're so high. Your retailer knows exactly how much you're paying in demand charges. Until now, you probably didn't.
Demand charges can make up 30–50% of a business electricity bill — and most business owners have never heard of them.
Your electricity meter doesn't just measure how much electricity you use — it also records how fast you're using it at any given moment. Demand is measured in kilowatts (kW) or kilovolt-amperes (kVA), and your meter takes a reading every 15 or 30 minutes depending on your network.
At the end of the billing period, your retailer finds the single highest reading from all those intervals. That one reading — your peak demand — becomes the basis for your demand charge. It doesn't matter if it only happened once. It doesn't matter if the rest of the month was quiet. That one spike sets the price.
This is fundamentally different from usage charges. Usage charges are like paying for how many litres of water flow through your tap over a quarter. Demand charges are like paying for the maximum flow rate of water at any single instant — even if you only turned the tap on full blast for 15 minutes on one Tuesday morning.
Demand charges are high because the electricity network has to be built to handle peak demand, not average demand. Every transformer, cable, and substation in your area has to be sized for the worst-case scenario — the moment when everyone is drawing maximum power simultaneously. That infrastructure is expensive, and demand charges are how networks recover that cost.
For most businesses, the biggest spikes happen at morning startup. Picture a café at 5:30am: the owner walks in and turns on the oven, the espresso machine, the dishwasher, the air conditioning, the lights, and the cool room compressor kicks in — all within a few minutes. That 15-minute window where everything fires up simultaneously creates the peak that sets demand charges for the entire month.
Other common causes of high demand peaks include seasonal air conditioning load (the first hot day of summer), equipment faults that cause a motor to draw more power than normal, and simply running too many high-draw appliances at the same time.
For SMEs on demand tariffs, demand charges typically make up 30–50% of the total electricity bill. The exact percentage depends on your tariff structure, your peak demand relative to your total usage, and your network area.
To put real numbers on it: a café with a quarterly bill of $2,400 might be paying $800–$1,200 in demand charges alone. A small manufacturing workshop with a $5,000 quarterly bill could be paying $1,500–$2,500 in demand charges. These aren't unusual figures — they're typical for businesses on demand tariffs.
The problem is that most bills don't clearly label demand charges or explain what they mean. They're often buried in the line items as "demand charge," "capacity charge," or "kW charge" without any explanation. BillDecoder identifies demand charges on your bill and shows you exactly what percentage of your total they represent.
Yes — and the strategies are surprisingly simple. The goal is to flatten your peak, not necessarily to use less electricity overall. Here's what works:
Stagger your equipment startup. Instead of turning everything on at once in the morning, introduce a 10–15 minute gap between each major appliance. Turn on the oven first, wait, then the espresso machine, wait, then the air conditioning. This single change can reduce your peak demand by 20–40%.
Avoid running high-draw equipment simultaneously. If you know which equipment draws the most power (typically heating, cooling, and motors), try not to run them all at the same time. This is especially important during the first hour of the business day.
Fix your power factor. If your power factor is below 0.9, you're paying for wasted electrical capacity that inflates your demand reading. A capacitor bank ($3,000–$5,000 installed) fixes this permanently, typically paying for itself in 10–18 months.
Consider demand monitoring. Real-time demand monitoring systems (from around $500) alert you when your demand is approaching your previous peak, giving you a chance to shed load before a new peak is set.
Review your tariff structure. Some businesses are on demand tariffs when they could be on time-of-use tariffs, or vice versa. An independent review of your tariff structure — which BillDecoder does automatically — can identify whether you're on the right plan.
No. The Default Market Offer (DMO) — the government price cap for electricity in NSW, South Australia, and South East Queensland — explicitly excludes customers on demand tariffs. The Victorian Default Offer (VDO) similarly does not cover demand tariff customers.
This means most SMEs with demand charges on their bill have no regulated price protection. Your retailer can set demand rates at whatever the market will bear. This makes it even more important to understand what you're paying and whether a better deal is available — which is exactly what BillDecoder helps you do.
Do residential bills have demand charges?
Most residential bills don't. Demand charges mainly appear on business electricity bills, particularly those on demand tariffs (sometimes called capacity tariffs). If you're on a standard residential plan, your charges are almost always usage-based only.
Will solar panels reduce my demand charges?
Not directly. Demand charges are based on your peak draw from the grid. Solar can help if it's generating during your peak demand window, but if your peak happens early morning or on cloudy days, solar won't lower it. Battery storage paired with solar is more effective for demand management.
Can I see demand charges on my bill right now?
Yes — upload your bill to BillDecoder and we'll identify how much of your bill is demand charges, what caused your peak, and what you can do about it. It takes 60 seconds.
Is there a government price cap on demand charges?
No. The Default Market Offer (the government price cap for electricity) explicitly excludes customers on demand tariffs. This means most SMEs with demand charges have no regulated price protection.
Want to see demand charges on your own bill?
Upload your bill and we'll show you exactly how much you're paying in demand charges — and what you can do about it.
Analyse your business billLast updated: March 2026