Demand charges are based on the single highest spike in your electricity use during a billing period \u2014 one 15-minute peak sets the charge for the entire month. For many Australian businesses, demand charges make up 30\u201350% of the total electricity bill. The good news is that reducing demand charges doesn't require using less electricity overall. It requires flattening your peak \u2014 spreading your electricity use more evenly instead of spiking.
These three changes are ordered from cheapest (free) to most investment. The first one costs nothing and can be done tomorrow morning. Together, they can reduce demand charges by 20\u201350%.
The single most effective change you can make costs nothing. Instead of turning everything on at once when you open for the day, introduce a 10–15 minute gap between each major appliance. Turn on the oven first and let it warm up. Then the espresso machine. Then the dishwasher. Then the air conditioning. Each piece of equipment has an inrush current — a brief spike when it starts up that's much higher than its running load. When you start everything simultaneously, those spikes stack. When you stagger them, each spike happens alone. This single change can reduce your peak demand by 20–40%, which directly reduces your demand charges by the same percentage.
If your power factor is below 0.9 and you're on a kVA demand tariff, you're paying a premium on every demand charge because of wasted electrical capacity. A capacitor bank is a piece of equipment installed at your switchboard that generates reactive power locally, so your business no longer draws it from the grid. It's a permanent fix — once installed, it works automatically with no ongoing costs. A capacitor bank for a typical SME costs $3,000–$5,000 installed and pays for itself in 10–18 months through reduced demand charges. Ask any licensed electrician to measure your power factor — it takes about 30 minutes. If it's below 0.9, get a quote. See our full power factor guide for the complete explanation.
A demand monitoring system tracks your electricity demand in real time and alerts you when you're approaching your previous peak. This gives you the chance to shed load — turn off a non-essential appliance or delay starting something — before a new peak is set. Basic demand monitoring systems start from around $500. More sophisticated systems can automatically control certain circuits when demand approaches a threshold. For businesses where demand charges are a significant portion of the bill, the payback on a monitoring system is typically 3–6 months. The key insight is that you only need to avoid exceeding your previous peak for one 15-minute interval to prevent a new, higher demand charge.
A common mistake is trying to reduce demand charges by using less electricity overall. That's not how demand charges work. They're based on your peak spike, not your total consumption. A business that cuts its total usage by 20% but still turns everything on at the same time in the morning will see the same demand charges. It's like a speed camera \u2014 it doesn't matter how slowly you drove for the rest of the month if you hit 120 in a 60 zone for one minute. Focus on flattening the peak, not reducing the total.
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 your peak demand is.
Analyse your business billWill using less electricity reduce my demand charges?
Not necessarily. Demand charges are based on your peak spike, not your total usage. A business that uses less electricity overall but still has the same morning startup spike will see the same demand charges. It's about flattening the peak, not reducing total consumption.
How quickly will I see savings from staggering startup?
Immediately — from your very next bill. Demand charges are reset each billing period. If you stagger your startup effectively from today, your next bill will reflect a lower peak demand.
Can my retailer help me reduce demand charges?
Some retailers offer demand management products or tariff advice, but their incentive is mixed — lower demand charges mean lower revenue for them. An independent analysis (like BillDecoder) is more likely to give you unbiased advice.
Last updated: March 2026