If you've ever looked at your business electricity account and wondered why there's a large charge that doesn't seem to relate to how much power you actually used, you've probably found your demand charge. For many South African businesses, this single line item accounts for 30–50% of their total electricity cost. And most businesses don't understand how it's calculated — or how easily it can be inflated by a single month's anomaly.
What Is Maximum Demand?
Electricity demand is different from electricity consumption. Consumption is the total kilowatt-hours (kWh) you use over a month — the running tally of every light, motor, and machine on your premises. Demand is the peak rate at which you draw power, measured in kilowatts (kW) or kilovolt-amperes (kVA).
Your maximum demand is recorded as the highest 30-minute average power draw measured by your meter during the billing period. Even if you hit that peak for just 30 minutes on a single day and ran at 50% capacity for the rest of the month, your demand charge is based on that peak figure.
Why Municipalities Charge for Demand
The electricity grid must be sized to handle the maximum load that every connected customer might draw simultaneously. Your demand charge reflects the infrastructure cost of having that capacity available — whether you use it constantly or not. Think of it as a reservation fee for your slice of the grid's capacity.
For Eskom-supplied businesses (and municipalities passing through Eskom bulk supply charges), demand charges are structured into tariff categories like Megaflex, Miniflex, and Nightsave. The applicable rate depends on your voltage level, your supply type, and your location.
The Notified Maximum Demand (NMD) Problem
On most commercial tariffs, you have a Notified Maximum Demand (NMD) — a figure you declare to your municipality that represents the maximum demand you expect to draw. Your network access charge (the fixed infrastructure fee) is set based on this figure.
Here's where many businesses get caught: if your NMD was set years ago when your operations were larger, or if it was never formally negotiated and defaulted to a conservative estimate by the municipality, you may be paying a network access charge based on a higher figure than you actually need.
Conversely, if your actual measured demand frequently exceeds your NMD, your municipality may apply penalty charges — or worse, force a renegotiation at a higher rate.
How Demand Charges Get Inflated
Equipment startups: Large motors, compressors, and HVAC systems draw significantly more current on startup than during normal operation. If multiple pieces of equipment start simultaneously, the peak demand for that 30-minute window can be far higher than your typical operating demand.
Power factor events: Low power factor causes your apparent power demand (kVA) to be much higher than your active power demand (kW). Most commercial tariffs charge on kVA, so poor power factor is expensive — and correctable.
Metering glitches: Faulty meters or communication errors can record a spike that didn't actually occur. Without independent verification of your demand readings, you'd never know.
What You Can Do
Review the last 12 months of your electricity accounts and identify the maximum demand recorded each month. If there's one or two months that are significantly higher than the rest, investigate whether those spikes reflect actual usage or anomalies worth disputing.
Check whether your NMD still reflects your current operations. If your business has scaled down, consolidated shifts, or upgraded to more efficient equipment, your NMD may be due for a formal review with your municipality.
OptiRate's Rate Calculator allows you to verify that the demand charge rates applied to your account match the published Eskom tariff for your category and billing period — and flags whether your NMD is correctly set relative to your actual usage profile.
Check your electricity demand charges with the free Rate Calculator →
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