kWh vs kW and demand charges

The two units

EIA defines a kilowatt (kW) as one thousand watts, and a kilowatt-hour (kWh) as one kilowatt of power expended for one hour. One kWh equals 3,412 Btu. Power is the rate, energy is the amount: running a 1 kW heater for 3 hours uses 3 kWh.

Think of kW as the speed on the dial and kWh as the distance driven. The utility has to build wires and plants for the fastest speed that many customers reach at the same time. That is why some rates charge for speed as well as for distance.

Illustrative arithmetic with round numbers, not measurements of any product.

What a demand charge is

EIA describes a demand charge as the part of a consumer's bill based on the consumer's maximum electric capacity usage, calculated from the billing demand under the rate schedule. In practice the meter records the highest use in a short window of the month, and the bill multiplies that kW by a price per kW.

Example, with round numbers and no real tariff: a shop with a 50 kW peak and a rate of $10 per kW pays $500 a month for demand, whatever its kWh. Cut the peak to 40 kW and the demand part falls to $400 with no change in kWh. A single hot afternoon with everything running can set the charge for the whole month.

EIA-861 does not report which residential rates include a demand charge: no data. Home rates are usually energy-only, but some utilities offer or require demand-based plans. Check your tariff.

Why it shows up in prices anyway

Sector average prices already include any demand charges, because they are revenue divided by kWh. In 2025 the U.S. average business price was 13.41 cents per kWh against 17.30 for homes.

Source: EIA retail sales, 2025. Average price is revenue divided by kWh, so any demand charge is already inside the business and industry figures. Retrieved 2026-10-02. CSV, 6 rows.

Meters that can record the peak

Time-based rates and demand billing need a meter that records use in short intervals. In the EIA-861 2024 file, 84% of the 147,612,180 residential meters reported are advanced metering infrastructure (AMI). The share varies by state.

Source: EIA-861 2024, Advanced_Meters: residential AMI meters divided by residential meters; the table shows the eight lowest shares. Retrieved 2026-10-02. CSV, 51 rows.

15,832,411 home customers are enrolled in dynamic pricing programs (time-of-use, real-time, variable peak, critical peak or critical peak rebate), and 49 states have at least one utility offering a residential time-of-use rate in the file.

Your own use across the year

EIA's hourly grid data shows total U.S. load peaks on summer afternoons, while winter load peaks in the morning and evening (EIA Today in Energy, February 21, 2020). Your kW peak and your kWh total follow the same seasons.

Key facts and where they come from

CSV, 11 rows.

Related guides

• How to read your electric bill
• Electric bill line by line
• EV charging at home: what it costs by state