# Billing Determinants — The Four Numbers That Set Your Bill

> Every dollar on a commercial electricity statement is a measured quantity multiplied by a price. Learn the four determinants and the bill stops being a mystery.

Section: Reading the Bill  
Author: Nil Masferrer Jiménez  
Published: 2026-08-12  
Reading time: 4 min

A commercial electricity bill looks complicated because it has a lot of lines. It stops looking complicated the moment you notice that every one of those lines has the same structure.

**A determinant, multiplied by a price.**

That is the whole document. The determinant is a quantity the utility measured, or derived from something it measured. The price is a number in the tariff. Learn the determinants and you can rebuild the bill from first principles, which is the only reliable way to know whether it is right.

## The determinants you will actually meet

| Determinant | Unit | Measured or derived | Usual price form |
| --- | --- | --- | --- |
| Energy | kWh | Measured, summed over the period | ¢/kWh |
| Billed demand | kW | Derived from the highest interval | $/kW-month |
| On-peak demand | kW | Highest interval inside a defined window | $/kW-month |
| Apparent power | kVA | Measured or derived from kW and power factor | $/kVA-month |
| Power factor | ratio | Derived from kW and kVAR | Adjustment or penalty |
| Customer | account | Fixed | $/month |

*What each determinant measures and how it is priced*

Note the third column. Two of these are read off the meter and the rest are calculated from the tariff's own rules. That distinction is where disputes come from, because a calculated determinant depends on a definition you have to go and read.

## Energy is the easy one

Kilowatt-hours consumed. On a time-of-use schedule they are split into buckets and each bucket priced separately, and on a seasonal schedule they are split at the season boundary, but the quantity itself is unambiguous: it is what the register counted.

The only trap is the meter multiplier. If your service is metered through instrument transformers, the register reading is scaled before it becomes the billed quantity, and a wrong multiplier makes every determinant on the bill wrong by the same proportion. [Meter multipliers and CT ratios](https://thedemandcharge.com/articles/meter-multiplier-ct-ratio) covers how to verify it.

## Billed demand is not measured demand

This is the distinction that costs money.

**Measured demand** is what the meter recorded: the highest average load over any single interval in the period, usually fifteen minutes. It is a fact.

**Billed demand** is what the tariff says you pay for. It starts from measured demand and then applies whatever adjustments the schedule specifies:

- a **ratchet floor**, holding billing demand at a percentage of a previous peak;
- a **contract minimum**, if you have a contracted capacity;
- a **power factor adjustment**, scaling measured kilowatts upward when power factor is below a threshold;
- a **seasonal or window restriction**, counting only intervals inside a defined period.

A site can be billed for considerably more demand than it drew in the month, entirely legitimately, because the tariff defines the determinant that way. If your demand line does not match your highest interval, the explanation is almost always in this list rather than in an error.

The mechanism that most often produces the gap is the ratchet, which deserves its own treatment: [ratchet clauses](https://thedemandcharge.com/articles/ratchet-clause-explained).

## On-peak demand is a separate determinant

Tariffs frequently bill two demand determinants at once: a facility demand measured across the whole month, and an on-peak demand measured only inside a defined window. They carry different prices, and a site can be excellent on one and poor on the other.

This matters when planning. A control strategy that moves load out of the afternoon window cuts on-peak demand and may leave facility demand exactly where it was, because the new peak simply appears at six in the morning. If the tariff bills both, half the expected saving does not arrive. See [facility, on-peak and billing demand](https://thedemandcharge.com/articles/facility-vs-on-peak-demand).

## Apparent power and power factor

Some tariffs bill demand in kilovolt-amperes rather than kilowatts. Others bill kilowatts but apply an adjustment when power factor falls below a threshold. A third group levies an explicit penalty per kVAR.

These are three different determinants dressed as one concept, and a capacitor investment that pays back under one may not under another. Which of the three your tariff uses, and the arithmetic that follows from it, is covered in [power factor penalties explained](https://thedemandcharge.com/articles/power-factor-penalties-explained).

## Reading the bill as an equation

Once the determinants are identified, the bill becomes checkable. Take each block, multiply the determinant by the tariff price, and confirm it reconciles.

**Rebuilding a simple general service bill**

Substitute your own determinants and your own tariff rates.

- Energy: 420,000 kWh at 6.8¢: $28,560
- Billed demand: 1,400 kW at $14.50/kW: $20,300
- Customer charge: $310
- (Subtotal before riders): $49,170
- Demand-based riders: 1,400 kW at $3.20/kW: $4,480
- Energy-based riders: 420,000 kWh at 0.9¢: $3,780
- **Total before tax: $57,430**

*Note what this shows: demand and demand-based riders together are $24,780 of a $57,430 bill. Rates and quantities here are illustrative. Run it with the numbers on your own statement and your own tariff sheet.*

The last line of that calculation is the reason this site exists. The energy block is the one everybody watches, and on a demand-heavy schedule it is not where the leverage is.

## Why the determinants matter more than the rates

You cannot negotiate a regulated tariff rate. Rate schedules are filed with and approved by the state commission, and they apply to every customer who qualifies for them.

What you can change is the determinants. You can move the energy into cheaper hours. You can lower the peak that sets billed demand. You can correct the power factor that inflates it. And you can qualify for a different schedule whose determinants suit your load shape better, which is covered in [how to choose a rate schedule](https://thedemandcharge.com/articles/how-to-choose-a-rate-schedule).

Every project on this site is, underneath, an attempt to change one determinant without changing the output of the plant.

## What to do next

Get one statement and one tariff sheet side by side, and mark every line on the bill with the determinant it is priced on. Sites doing this for the first time frequently discover a demand-based rider they had been treating as an energy cost, which by itself changes the return on any peak reduction project.

Then get the interval data, because the monthly summary tells you the peak happened but not when or why: [how to get your interval data](https://thedemandcharge.com/articles/interval-data-how-to-get-it).


## Sources

- [EIA — Electricity sales, revenue and average price](https://www.eia.gov/electricity/sales_revenue_price/)
- [EIA — Form EIA-861 utility data](https://www.eia.gov/electricity/data/eia861/)
- [National Association of Regulatory Utility Commissioners](https://www.naruc.org/)
- [Federal Energy Regulatory Commission](https://www.ferc.gov/)

## Frequently asked questions

### How many determinants does a typical commercial tariff use?

Two on a simple general service schedule — energy in kilowatt-hours and billed demand in kilowatts — plus a fixed customer charge. Larger schedules add on-peak demand as a separate determinant, and some add apparent power in kVA or a power factor adjustment on top.

### Is billed demand the same as measured demand?

Not necessarily. Measured demand is what the meter recorded. Billed demand is what the tariff says you pay for after any ratchet floor, any contract minimum and any power factor adjustment have been applied. The difference between the two is where a surprisingly large amount of money sits.

### Why does the tariff distinguish kW from kVA?

Because they measure different things. Kilowatts are the power doing useful work. Kilovolt-amperes include the reactive component that does no work but still has to be carried by the transformer and the conductors. A tariff billing on kVA is charging you for the capacity your site occupies rather than the work it performs.

### Where do I find which determinants apply to me?

In the rate schedule, under a heading usually called billing determinants, determination of demand, or monthly rate. Rate schedules are public documents filed with the state utility commission.

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