Load factor and the demand charge are usually explained together, and that leads people to assume one is an input to the other. It is not. A commercial demand charge is set by the single highest interval on the meter, multiplied by a rate per kilowatt, and load factor appears nowhere in that calculation. What load factor does is decide how much energy that one charge is spread across, which is another way of saying what the charge costs you per kilowatt hour. This page works that through on a real bill.
The demand charge does not read your load factor
On a ComEd commercial bill the demand charge is the Distribution Facilities Charge: billed kW times a rate per kW. The billed kW is the highest 30 minute site coincident demand recorded inside the on peak window, 9:00 AM to 6:00 PM on weekdays.
On a reconciled September 2025 bill for a Small Load account under 100 kW, that was 40.91 kW at $14.59 per kW, which is $596.88. The bill reproduced to the cent from the meter's interval data. Nothing in that line asks how many kilowatt hours the building used. Two sites with identical peaks pay identical demand charges whether one ran flat all month and the other ran hard for three mornings.
Where load factor shows up: the cost per kilowatt hour
The same bill carried 3,873 kWh of usage over 30 days, or 720 hours. That gives the load factor:
Load Factor = 3,873 / (40.91 x 720) = about 13 percent
Now divide the demand charge by the energy it sat on top of:
$596.88 / 3,873 kWh = about 15.4 cents per kWh
That is what the demand charge cost this site for every kilowatt hour it used. The supply line on the same bill, the energy itself, was priced at 7.474 cents per kWh. The demand charge cost this building roughly twice as much per kilowatt hour as the electricity did, and the low load factor is the whole reason: a peak of 40.91 kW was spread over a month in which the building mostly idled.
The same peak at a higher load factor
This section is arithmetic on the bill above, not a prediction of anyone's bill. Hold the peak at 40.91 kW and the rate at $14.59 per kW, so the Distribution Facilities Charge stays $596.88, and change only how much energy sits underneath it.
| kWh in the month | load factor | demand charge | demand cost per kWh |
|---|---|---|---|
| 3,873 (the measured bill) | 13 percent | $596.88 | 15.4 cents |
| 10,000 | 34 percent | $596.88 | 6.0 cents |
| 20,000 | 68 percent | $596.88 | 3.0 cents |
The charge never moves. The cost per kilowatt hour falls in direct proportion to the load factor, because the general form is:
Demand cost per kWh = rate per kW / (load factor x hours in the period)
At $14.59 and 720 hours, a 13 percent load factor gives 14.59 / (0.13 x 720), which is the 15 cents above. The same rate at 68 percent gives 3 cents. This is why the load factor by building type examples matter for cost even though the tariff ignores the ratio: a cold store and a distillery on the same rate, with the same peak, pay very different delivery prices for each unit of energy.
Which direction actually lowers the bill
The table above can be read the wrong way. Raising load factor by using more kilowatt hours does lower the demand cost per kWh, and it also raises the total bill, because every extra kWh is bought at the supply rate. A building that runs equipment it does not need in order to flatten its ratio has made its bill bigger.
The only change that reduces the charge itself is a lower peak. On the measured bill, the largest interval of the whole period was 41.94 kW at 8:30 AM, outside the on peak window and not billed. Thirty minutes later the same morning ramp measured 40.91 kW, now inside the window, and that reading set the charge. The peak was a boundary event, not the building's physical maximum, and that is the kind of thing only interval data shows. Reducing demand charges is about finding which interval did it and why, not about the ratio.
Load factor is the diagnostic. It tells you whether your delivery cost is concentrated on a few intervals or spread across the month, and so whether chasing the peak is worth the effort. It is not a dial.
What this page was checked against
One ComEd bill, September 2025 billing period, Retail Delivery Service 0 to 100 kW, two meters. The Distribution Facilities Charge, the supply line, the per meter kWh and the billed site coincident demand all reconcile to the bill from the interval export. The $14.59 per kW figure is the effective rate on that bill for that class and period; ComEd's demand rates are per period, so it is not a rate to carry to a different year or class. ComEd commercial rates lists the other reconciled figures we hold.
Does load factor affect the demand charge?
No. The demand charge is billed kW times a rate per kW, and load factor is not part of it. Load factor affects what that charge works out to per kilowatt hour, which is a different question.
Is a low load factor why my demand charge is high?
Not directly. A high demand charge means a high peak. A low load factor means that peak sits far above your average, so the charge is spread over few kilowatt hours and costs a lot per unit. On the reconciled bill above, a modest 40.91 kW peak produced a charge worth 60 percent of the bill because the building used little energy around it.
How do I calculate demand cost per kWh?
Divide the demand charge in dollars by the kWh used in the same billing period. On the bill above that is $596.88 divided by 3,873 kWh, about 15 cents. Compare it to the supply rate on the same bill to see which of the two is the bigger price you are paying for energy.
Will a higher load factor lower my bill?
Only if it comes from a lower peak. A higher ratio produced by using more energy lowers the demand cost per kWh and raises the total bill at the same time. The load factor calculator gives you the ratio; whether the peak behind it can move is a question for the interval data.
References