Electric demand is a measure of the average rate at which your facility consumes electricity in a 15-minute interval.
In general, the more electrical devices you operate at one time, the higher your demand.
In most cases, demand charges are assessed as a component of your electric bill for business, commercial and industrial customers.

Your Transmission and Distribution Service Provider (TDSP) must design its equipment to handle the maximum amount of electricity expected at one time.
Electric lines, transformers, substations, and other equipment are sized to supply all of the electricity you need at once, whether you require that amount for a single 15-minute period or for months.
Demand determines the investment that the TDSP must make to deliver electricity to a facility effectively. That investment is recovered by allocating demand charges according to each customer's usage.

Demand is how much power you require at a single point in time, measured in kilowatts (kW).
Consumption is how much energy you use over a period of time, measured in kilowatt-hours (kWh).
Example: assume ten lights are turned on each with a 100-watt bulb. To accomplish this, you must draw - or demand - 1,000 watts, or 1 kW of electricity from the power grid. If you leave all ten lights on for two hours, you would consume 2 kWh of electricity.

Assume now that only five 100-watt lights are turned on for five hours. Since only half of the lights are being run, the demand is cut in half to 0.5 kW.
Because all five lights ran for a longer period of time, more electricity has been consumed.
The important distinction is that demand is an average measure of the rate of electric use, and consumption is a measure of overall electric use.

One business may have a much greater demand than another - and require larger power lines, transformers, etc. to receive all the electricity it needs. To recover the cost of this larger equipment, the TDSP assesses individual demand charges to each Retail Electric Provider (REP).

Demand varies by customer and month. To record demand, a special meter tracks the flow of electricity to a facility over a period of time, usually 15-minute intervals.
Over the course of a month, the 15-minute interval with the highest demand is recorded and reflected on a monthly bill.
In some cases, historical demand from previous months can factor into demand charges. See your Terms of Service for more information.

Not necessarily. The TDSP assesses demand charges on most business, industrial and commercial customers, and transmits those charges directly to the customer's REP.
In most cases, the REP will factor these costs into the price of electricity sold to its customers, and pass along the charges to the customers.
Whether the demand charges are explicitly stated in a customer's bill, bundled into a contracted rate, or otherwise included, depends on each REP's billing system, Terms of Service, or contract details.

In general, there are two strategies for reducing demand:
Change what equipment is run.
Change when the equipment is run.
Reducing the number of devices operating simultaneously will help by reducing the cumulative effect of multiple electrical draws.
Upgrading to high efficiency equipment will also assist in demand reduction. Additionally, demand can be lowered by running devices at different points in the day - effectively balancing out the electrical spikes over time.
There are many unique events that may also affect demand:
Facilities performing fire-pump tests
Plant start-up
Operations or recovery from power outages are at risk for increased demand charges if "staging" strategies are not implemented.
In any of these scenarios, it is the customer's responsibility to ensure testing or restart operations do not produce a higher demand.
Use caution in making changes to operations - improper planning can lead to equipment failures or other problems.
TXU Energy recommends a professional energy manager assist customers in creating a demand reduction strategy.