The Demand Charge on Your Bill: What It Is, and How It’s Shared Fairly
If you rent or own a unit in a building with shared electricity supply, you may notice a line on your bill that isn’t simply your energy use. It’s called a demand charge (or load charge), and it often causes confusion. Here is what it means, why it exists, and how Snap & Bill divides it between occupants.
Two different things: energy and demand
Your meter records energy in kilowatt-hours (kWh). That’s the total amount of electricity you consumed over the month — like the total litres of water that came out of your tap.
But electricity utilities bill buildings for a second thing: demand, measured in kilovolt-amperes (kVA). Demand is not how much you used — it’s how hard you pulled at the peak. Think of it as the width of the pipe the utility had to install so that everyone could draw power at the same time.
Here’s the key idea most people miss:
Two tenants can use the exact same amount of energy in a month and still place very different loads on the building.
Imagine Tenant A runs a 3 kW air-conditioner for one hour a day, and Tenant B runs a small 125 W fan around the clock. Over a month they use roughly the same energy — but Tenant A briefly pulls 24 times more power at once. The utility has to size the building’s supply, transformer and cables for that peak. That peak is what the demand charge pays for.
(A short technical note: kVA is slightly larger than the raw power in kW because of “power factor” — equipment like motors, compressors and air-conditioners draws extra current that the cables must carry even though it does no useful work. That’s another reason utilities bill in kVA rather than kW.)
Why your sub-meter can’t measure demand directly
Most buildings receive one large three-phase supply, which is then split into individual single-phase meters, one per unit. These single-phase sub-meters are inexpensive and reliable — but they typically record only kWh. They do not record kVA or your individual peak demand.
This creates a practical problem. The utility hands the building a single demand charge in kVA for the whole supply. But no sub-meter can tell us how much of that peak you were responsible for. It was never measured.
So it has to be allocated — divided up using a rule — rather than measured.
How Snap & Bill allocates the demand charge
Snap & Bill shares the building’s demand charge among units in proportion to the energy (kWh) each unit consumed, measured against the total energy the utility billed for the whole building.
The formula is simple:
Your share = (Your kWh ÷ Utility-billed kWh for the whole building) × the demand-charge amount on the utility bill
A worked example:
- The utility bills the building a demand charge of 30,000 (in whatever currency your utility uses) for the month.
- The utility’s main meter recorded 20,000 kWh for the whole building.
- Your unit’s sub-meter recorded 600 kWh.
- Your share = 600 ÷ 20,000 = 3%
- You pay 3% × 30,000 = 900 of the demand charge.
The logic is intuitive: the more electricity you use, the larger your likely contribution to the building’s demand, and the larger your share of the charge. A unit that barely uses power pays almost nothing; a heavy user pays proportionally more.
You never have to work any of this out yourself. Once the meter readings are in — captured on the mobile app, taken from an uploaded utility bill, or pulled automatically from a smart-meter platform — Snap & Bill does the heavy lifting, applying the figures and calculating each unit’s share automatically. The amount on your statement is already final; the example above is only here so you can see where it comes from.
Note the denominator carefully: it is the utility’s total billed energy, not the sum of the individual sub-meters. Those two figures differ, because the main meter also captures common-area consumption — lifts, pumps, common lighting — plus small line losses. Because that common-area energy sits in the denominator but is billed to no single unit, the slice of the demand charge tied to common areas is never pushed onto you. It stays with the building’s common account, where it belongs. In the example above, if the sub-meters summed to 18,000 kWh, occupants collectively cover 90% of the demand charge and the common account carries the remaining 10% caused by the shared equipment.
Is this perfectly fair? An honest answer
Energy (kWh) is a proxy for demand — a very reasonable one, but a proxy. When all the units in a building are similar (for example, all residential apartments with similar appliances), energy use tracks peak demand closely, and this method is both fair and transparent.
It is less exact when a building mixes very different users — say, a restaurant or workshop alongside quiet residential flats. A high-power user with a “spiky” load can contribute more to the building’s peak than their energy share alone suggests. In that case, proportional-to-kWh allocation is still the fairest method available without demand-capable meters — but it is an approximation.
The only way to allocate demand with full precision is to install sub-meters that measure kVA or maximum demand directly. Where accuracy matters — mixed-use buildings, or units with heavy air-conditioning and machinery — Snap & Bill can advise on upgrading to demand-capable metering so each unit is billed on its actual measured demand rather than an estimate.
What you should expect on a well-run building
- The demand charge and how it is split should be stated openly on your bill and in the building’s rules, so there are no surprises.
- The basis of the split (which energy total is used, and how common-area consumption such as lifts, pumps and common lighting is handled) should be defined in advance, not improvised.
- If your building has heavy shared equipment or very different types of occupants, ask whether demand-capable metering would give a fairer result.
In short
The demand charge pays for the building’s peak electrical capacity, not its total energy — which is why it appears separately from your kWh. Because standard sub-meters measure only energy, Snap & Bill shares this charge in proportion to each unit’s energy use: the clearest, most transparent method available, and an accurate one wherever tenants have similar load profiles. Where they don’t, measured demand metering is the upgrade that removes the estimate entirely.