Ask the Energy Expert

You asked, we answered: What’s the difference between demand rates and commercial rates?

When talking with business owners, I’m frequently asked about the difference between “demand rates” and “commercial rates,” and why understanding this distinction is important for their business.

Understanding your electricity rate structure is one of the smartest ways to manage your business’s energy costs. Let’s break it down:

Commercial rates: The foundation of business pricing

Commercial rates refer to the overall rate schedules designed for business customers, as opposed to the residential rates designed for homeowners and renters. At FPL, commercial rates apply to businesses of various sizes and types, from small retail shops to large industrial facilities.

These rates are structured differently than residential pricing because businesses typically have different usage patterns – they often consume more electricity during peak daytime hours when the demand for electricity is high, and their energy needs can vary dramatically based on industry and operations.

Demand rates: How you pay for peak usage

Here's where it gets specific: demand charges are a component of many commercial rate schedules. While residential customers typically pay only for the total kilowatt-hours (kWh) they use, many commercial customers see their charges split between energy (kWh charges) and demand (kWd charges).

Demand is measured in kilowatts (kW) and represents the highest rate of electricity usage during any 30-minute interval in your billing period. Think of it like the difference between how much water flows through your pipes over a month versus the maximum flow rate when all your faucets are running at once.

For example, if your business runs multiple air conditioning units, lighting and equipment simultaneously on a hot Tuesday afternoon, creating your highest power draw of the month, that peak becomes your demand charge for the entire billing period – even if it only lasted 30 minutes.

Why demand charges exist

Demand charges help utilities ensure they have enough generation and infrastructure capacity to meet everyone's peak needs simultaneously. . When thousands of businesses ramp up their energy usage on hot summer afternoons, FPL must have enough power plants and transmission lines ready to handle that collective peak demand.

Managing your demand charges

If your business is subject to demand charges, here are key strategies to control your bill:

Monitor peak usage patterns. Avoid running multiple pieces of high-energy consuming equipment at the same time when possible. Stagger the startup of air conditioning units, manufacturing equipment or other major loads.

Consider load management systems. These can automatically cycle equipment to prevent demand spikes while still maintaining comfort and operations.

Time energy-intensive activities strategically. Schedule equipment maintenance, batch processing or other high-demand activities during off-peak hours when possible.

Finding your rate schedule

Your FPL bill shows your specific rate schedule in the account details section. Common commercial schedules include designations, like GS-1, GSD-1 or GSLD-1, with different structures for energy and demand charges.

You can also access detailed rate information through your online account, where you'll find your complete rate schedule and billing details.

The bottom line

Understanding whether your business pays demand charges – and how they're calculated – can unlock significant savings opportunities. FPL’s Business Energy Manager can help you dig even deeper into your energy use to find more ways to save and monitor demand usage. Even small changes to when and how you use electricity can help reduce your monthly demand charges.