Electricity Tariff Structure

A tariff is a set of rules, not a price

A tariff structure is not a price for electricity. It is the rulebook a utility uses to turn the cost of running the grid into the specific lines on your bill. It defines what gets measured, how it gets measured, and what each measurement costs. Two businesses on the same utility can pay very different bills for the same amount of electricity because they are on different rulebooks.

Utilities set those rules in regulatory proceedings. First a regulator approves how much revenue the utility is allowed to collect. Then the tariff decides how that amount gets split across customers and across the different parts of the bill. By the time it reaches you, the tariff is the machine that has already decided which parts of how you use power will cost you, and which will not.

The three charges on a commercial bill

Most commercial tariffs break the bill into three kinds of charge.

A fixed customer charge, the flat cost of being connected and metered at all, the same whether you run hard or sit idle.

An energy charge, based on total kilowatt hours used across the month. This is the part most people picture when they think about an electric bill, and in Illinois it is the part a competitive supplier can sell you.

A demand charge, based not on how much you used but on the highest rate you drew power at, measured over a short interval. This is the part that surprises people, because it does not track usage at all.

The shape of a tariff is mostly a question of how much weight it puts on each of these three, and exactly how it defines the demand piece.

What ComEd's commercial tariff actually looks like

Abstractions aside, here is a real one. A ComEd commercial account on Rate RDS carries all three charges, and the delivery demand piece appears as the Distribution Facilities Charge. Its structure is specific, and worth knowing.

The demand charge is a single flat rate per kilowatt of billed demand. On a 2025 Rate RDS account at secondary voltage, that rate reconciled to $14.59 per kW. There is no separate off-peak demand charge, and no ratchet carrying an old peak forward.

Billed demand is the highest thirty minute interval recorded between 9:00 AM and 6:00 PM on weekdays. Power drawn outside that window does not set the charge, no matter how high it climbs.

The per-kilowatt rate itself depends on the delivery class ComEd assigns the account, which it sets from the account's highest demand over the trailing twelve months rather than from any single month. Where you sit in the structure is a function of how you have used the system over time.

That is a tariff structure made concrete. Three charges, one of them a flat rate applied to a single, tightly defined interval. On one reconciled bill that structure turned a 40.91 kW billed demand into a $596.88 charge for the month. The delivery charge page walks through that reconciliation interval by interval.

To see which structure your own account sits in, the free ComEd bill reader takes the PDF bill and separates the three charges as your utility billed them, then identifies the delivery class by reconciling the demand line against the filed ratebook rather than asking you to know it.

Why the demand charge is where the structure bites

Energy charges are intuitive. Use more, pay more. The demand charge is where a tariff structure does something less obvious. It exists because the grid has to be built for the worst moment it will ever serve, not the average one, and that standby capacity costs money whether or not you use it. The demand charge is how the tariff recovers that cost, and it ties the recovery to a single peak interval rather than to your total consumption.

That one design choice is why a short overlap of equipment can outweigh weeks of steady operation, and why the same tariff can treat two similar looking businesses very differently.

Why your neighbor is on a different tariff

Utilities sort customers into tariffs by service voltage, demand level, and load pattern. A larger facility that draws high demand lands on a rate built around demand charges and delivery classes. A small storefront may sit on a simpler rate weighted toward energy. The sorting is not arbitrary. It reflects how much capacity each customer forces the system to hold ready. The more your peaks shape the infrastructure, the more your tariff is built to price those peaks.