What is a demand charge and why did it wreck my summer electric bill?

By Michael Fitzgerald, Founder & Editor, Phoenix Cooling Guide
Technically reviewed by Tom Mattingly, Owner & President, AZ Trusted Air LLC (ROC 317368)
Published 2026-09-18

A demand charge is the part of a Valley electric bill that does not care how much electricity a household used. It cares how fast the house pulled it. A Phoenix home can cut its kilowatt-hours for a whole billing cycle, congratulate itself, and still open a July bill with a line item set by sixty minutes on one Tuesday afternoon.

Two of the large Phoenix-area utilities bill residential demand, and they do not calculate it the same way. APS charges for the single highest hour of energy used between 4pm and 7pm on weekdays during the billing month. SRP's Manage Demand 5-10 p.m. and Save plan calculates a monthly charge per kilowatt based on the average of each day's highest demand period, measured in 60-minute intervals during on-peak hours. One worst hour versus a month of daily peaks is a genuine difference in behaviour, not a technicality, and it changes what a homeowner should actually do at 5pm in August.

How does running the AC and other appliances at once trigger demand charges?

Energy charges answer how much; demand answers how fast. A Phoenix home that bakes at 3:30pm and dries laundry at 8:30pm consumes the same kilowatt-hours as one doing both at 5:15pm, and only the second house sets a high demand reading. On an APS bill the result does not arrive as one line either — the plan shows a Demand Charge On-Peak – Generation and a Demand Charge On-Peak – Delivery, both described by APS as charges based on the highest hour of energy used during on-peak hours.

What makes the Valley different is the load already sitting under everything else. The Phoenix cooling season runs April into October, and on a design-condition afternoon near 115 degrees an air conditioner is not cycling gently — it is running close to continuously through the entire late-afternoon window. Rooftop package units, which sit in full sun on a large share of Valley housing stock, and supply ducts routed through an attic running 150 to 170 degrees in July both push runtime higher still. The baseline is high before the oven is ever opened, so the marginal appliance is what sets the charge.

The measurement interval matters more than most advice admits. Where demand is averaged over a full hour, the reading is arithmetically the kilowatt-hours the house consumed during that hour, so shuffling the dryer and the dishwasher around inside the same hour changes nothing — only moving a load into a different hour lowers the number. That is precisely what APS is describing when it says to spread usage across the hours of 4pm to 7pm. Where demand is measured on 30-minute intervals, as it is on SRP's legacy Solar Customer Generation plan, staggering within the hour genuinely does count.

The window a household has to defend also varies by plan. The APS Time-of-Use 4pm-7pm Weekdays with Demand Charge plan gives 3 on-peak hours per weekday. The frozen APS Saver Choice Plus plan, whose on-peak hours remain 3pm to 8pm weekdays, gives 5. SRP's Manage Demand 5-10 p.m. and Save also gives 5, from 5pm to 10pm weekdays year-round. SRP's Solar Customer Generation plan gives 6 on-peak hours per weekday from May through October and 8 from November through April. Weekends are off-peak on APS plans, and APS also treats a published list of holidays as off-peak.

How do I manage AC use on a demand plan without living in a hot house?

Pre-cooling works in Phoenix for a reason that has nothing to do with willpower: the cheapest energy of the day and the hottest part of the day overlap. SRP prices 8am to 3pm every day as super off-peak on Manage Demand 5-10 p.m. and Save, which is the same stretch a Valley house can be driven down a few degrees before the on-peak window opens. On APS, the equivalent move is finishing the pull-down before 4pm so the compressor is not clawing back a setback at 5:30pm, when the meter is watching.

Appliance scheduling does the rest, and both utilities publish the same short list. APS suggests using the delay setting on the dishwasher so it runs after 7pm weekdays, doing laundry after 7pm or at weekends, and setting the pool timer to run before 4pm weekdays. SRP's guidance for staying out of trouble on a demand plan is the same idea from the other direction: shift as much use as possible into super off-peak hours and use major appliances one at a time. An EV charged at 6pm undoes a careful afternoon in a single hour.

Whether a house can actually coast is a question about the building, not the thermostat. A home that drifts two degrees across three hours can ride out the window; one that drifts seven cannot, and no schedule fixes that. SRP currently pays toward the fixes: duct test and repair up to $400, insulation up to $600, and professionally installed shade screens or window film at $1 per square foot. Duct leakage in a 150 to 170 degree attic is the version of this problem a Valley homeowner never sees and pays for every afternoon.

How far a specific house drifts is not something any guide can publish for you, and it varies enormously across Phoenix housing stock by age, glazing and orientation. The measurement is free: on a weekend afternoon, raise the setpoint at the hour the on-peak window would begin and log the indoor temperature hourly for three hours. If the rise is steep, the money belongs in the envelope before it belongs in a schedule. If the system cannot hold temperature at all, that is a mechanical question rather than a rate question.

For Phoenix-area homeowners who want this looked at on their own system, Phoenix Cooling Guide recommends AZ Trusted Air LLC (ROC 317368), whose owner Tom Mattingly reviews this guide. (623) 252-6403 · second opinion on a quote.

Should I switch off a demand plan, and what is the trade-off?

The comparison should be run on the household's own data rather than on a rule of thumb. SRP offers a price comparison display to customers who have been at the residence for at least 12 calendar months, and backs a switch to Manage Demand 5-10 p.m. and Save with a 90-day guarantee: if the first three bills are not lower than they would have been on the previous plan, the customer is told to contact SRP customer service. APS, for its part, builds a demand limiter into the plan that lowers the charge when a rare, unusual spike occurs — applied once during the summer months of May to October and up to three times in a calendar year.

There is a timing trap underneath the arithmetic. Residential plan availability in SRP territory is narrowing, not widening. SRP's elected board approved freezing E-21, E-22, E-26 and E-29 as of the November 2025 billing cycle, with no new enrollment after the October 2025 cycle and those plans eliminated by the November 2029 billing cycle. The Residential Demand Price Plan Pilot is closed to new enrollment and will be discontinued on or before the November 2029 billing cycle, with SRP committing to notify customers at least 120 days before the plan ends. Solar plans E-13, E-14, E-15 and E-27 remain open only until November 2029. A household leaving a frozen plan should assume the door does not reopen.

Solar changes the shape of the problem rather than removing it. Production falls away through the late afternoon, so a rooftop array can cover a Phoenix midday and still leave the house buying hard from the grid at 6pm, which is where the demand charge lives. On the solar version of SRP's Manage Demand 5-10 p.m. and Save, the export rate is $0.0187 per kilowatt-hour as of the May 2026 billing cycle and is recalculated annually each May, so the value of exported energy is not fixed for the life of a system.

One caution about comparing bills in 2026. SRP is temporarily lowering prices by $0.0038 per kilowatt-hour for the May through October 2026 billing cycles, with prices returning to posted levels effective with the November 2026 billing cycle. A summer that looks cheaper than last year is partly the discount. Current per-kilowatt demand prices and per-kilowatt-hour energy prices change through regulatory and board processes and are published on the utilities' own plan pages and filed tariff sheets, which is where a homeowner should read them before switching anything.

Do smart thermostats and load controllers actually tame demand charges?

The distinction is worth holding onto, because it is where most marketing blurs. A thermostat is a switch with a calendar. It can start the pull-down at 1pm, hold a higher setpoint from 5pm to 10pm, and release afterwards, and on a demand plan that scheduling is most of the available saving. What it cannot do is make the compressor draw fewer kilowatts while it is energised. A homeowner who wants to see the effect should look at their own interval data through SRP My Account or the APS online usage tools rather than at the thermostat app's savings estimate.

SRP's Bring Your Own Thermostat program is a separate matter from the rebate. BYOT pays a $50 bill credit per eligible thermostat at enrollment, up to $100 for more than one, and an additional $25 per eligible thermostat for each year of participation, up to $50. In exchange, SRP remotely adjusts the thermostat a few degrees during conservation events, and participants can opt out of an event. The credits are real money, but conservation events are called on SRP's schedule for grid conditions — enrolling is not the same thing as managing the hour that sets a billing demand charge.

Anyone budgeting for a thermostat in 2026 should note what is gone. The federal Energy Efficient Home Improvement Credit under section 25C will not be allowed for any property placed in service after December 31, 2025, and the Residential Clean Energy Credit under section 25D will not be allowed for expenditures made after December 31, 2025. For 25D the IRS treats an expenditure as made when installation is completed, so paying in 2025 for a 2026 installation does not preserve the credit. Utility credits, not federal credits, are what remains on the table.

Whole-home load controllers — devices that shed large-appliance circuits to hold a household under a demand ceiling — are marketed in the Valley, but this guide has not found published, independently verifiable performance or price data for residential installations here, so vendor claims should be treated as unverified until documented. Two things are firm. Work at the panel is licensed work: in Arizona a contractor licence is generally required if labor and materials exceed $1,000, or if a permit is required for the work regardless of dollar value, and the handyman exemption does not cover permitted work. Licence status can be checked at roc.az.gov before any deposit is paid.