COINCIDENT PEAK DEMAND MANAGEMENT

What are Peak Demand Charges?

Peak Demand charges are one of many utility bill determinants that can appear on your energy bill. Peak Demand charges can be split into two types:

Coincident Peak (CP) Demand charges (also called “Capacity charges”) are based on your electricity use during the utility’s overall system peak. This is the time when the grid as a whole is most stressed (often a hot weekday afternoon). If your business contributes heavily to that system-wide peak, you pay more. If you use less during those peak times, your pay less. This structure encourages businesses to shift usage away from system peaks, helping the grid stay stable and efficient.

Non-Coincident Peak Demand charges (often shortened to “Peak Demand charges“) are calculated from your facility’s own highest demand in a billing period, regardless of when it occurs. You pay based on your site’s highest 15-minute (or 30-minute) usage interval, regardless of the grid’s status. This means your demand charges are tied to your facility’s peak demand, not the system peak demand.

In simplified scenario above, the facility’s Non-coincident Peak Demand for the day is set at 9:00. It does not depend on the system (regional or utility-wide) demand.

The facility’s Coincident Peak Demand for the day is set at 17:00 when the overall system peak demand occurs. It is called the Coincident Peak Demand because it coincides with the system’s peak demand.

An Energy Management System (EMS) can help to reduce CP Demand charges. CP Demand charge reduction is just one more layer that can be added to the EMS & DER value stack.

Coincident Peak Demand Prices are Increasing

As electricity grids around the world face increasing pressure, utilities and grid operators are raising their CP Demand charges to support required capital investments and to drive region-wide grid efficiency.

In 2025, jurisdictions such as the U.S. Midcontinent Independent System Operator (MISO) increased  CP Demand prices over 2,100%.

PJM Interconnection customers saw a 833% increase in CP Demand prices.

In the United Kingdom, CP Demand price increases were between 23% and 53% depending on the region.

What’s putting pressure on electricity grids?

  • Surging demand is being driven not only by data centers for AI centers and cryptocurrency, but also by:

    • The rapid growth of electric vehicles (EVs) and electrification of facilities

    • Ongoing population growth and urbanization, especially in densely populated cities.

    • Climate change is driving higher demand for air conditioning and cooling during hotter periods.

    Together, these factors force grid operators to invest heavily in new infrastructure and generation capacity.

  • Permitting delays for new power plants and grid infrastructure projects slow down the construction of much-needed capacity. As demand rises, these delays prevent supply from keeping up. Grid operators are then forced to rely longer on older, sometimes less efficient assets, and may need to procure expensive short-term generation to meet peak loads. The costs associated with these workarounds, along with the uncertainty and risk created by slow permitting, contribute to higher CP Demand prices.

  • Increasing weather risk—from more frequent and severe heatwaves, storms, and droughts—makes it harder for grid operators to manage electricity demand and supply. Extreme weather can cause sudden spikes in consumption (like air conditioning during heatwaves) or damage to grid infrastructure, requiring expensive contingency measures and rapid repairs. To handle these unpredictable events, operators need to invest in extra backup capacity, grid hardening, and emergency response resources. These higher costs are reflected in rising capacity charges.

How CP Demand Charges Work

With CP Demand pricing, large energy users are charged based on how much they contribute to the grid’s system-wide peak demand. Utilities identify the intervals during the year when the entire grid is under the most stress. These are called the coincident peaks - typically the five highest intervals (referred to as the 5CP). If you use more electricity during those peak intervals, you pay a bigger share of coincident peak demand charge. Here’s how it works:

  • The grid operator records the total system load every interval (typically an hour).

  • At the end of the year, they identify the peak intervals, i.e. the 5CP

  • Your demand during those intervals is averaged or summed.

  • Your % contribution to the total demand of all consumers determines your coincident peak-demand charge for the next year.

Let’s look at a scenario where five companies are participating in a CP Demand tariff:

In this example, we are aggregating demand by week to keep things simple. The five CP Demand weeks are clearly visible. What we also notice is that Alpha Industrial had a very large demand during the coincident peaks, while Epsilon University had a relatively low demand compared to others. This means:

  • Alpha Industrial will pay a much higher CP Demand price than Epsilon University

  • Epsilon University is using an EMS to help it reduce demand during system-peak periods.

How does an EMS help reduce your CP Demand charge?

The EMS monitors the predicted system demand

Many utilities publish the forecasted system demand profile for days ahead. Here is one example and here is another.

The EMS reads this forecast and uses analytics to determine if today or tomorrow is likely to result in a new peak-demand day.

If a new system peak is predicted, the EMS builds a demand management plan

Demand management plans can take many forms

Simple Plan

The EMS sends an alert to a human operator so they have enough time to reduce demand manually.

The operator will:

  • assess the current and near-future state of the facility and processes

  • consult with other teams and stakeholders

  • refer to standard operating procedures

  • manually trigger adjustments to loads and generation assets to reduce demand

Advanced Plan

The EMS automatically plans and acts to reduce demand during the predicted system peak. Here are some typical actions it takes:

  • Before the predicted system-wide peak:

    • Ensure any onsite batteries are fully charged so they can be used to offset grid power

    • Pre-cool or pre-heat space in the facility so that HVAC is not required during the system peak intervals

  • During the system-wide peak:

    • Sheds discretionary loads

    • Reduce EV charging rates

    • Discharge batteries and activate onsite generation

The Bottom Line

An EMS can help reduce CP Demand charges.

Solutions

  • ION Power meters are the most accurate & intelligent power meters available, measuring thousands of power quality and energy variables and transmitting them to the software system.

  • For non-critical loads or circuits, we supply basic meters that provide all the necessary measurements to support energy and electrification management

Electrical Metering

EnergyX® EMS Platform

  • The EnergyX® cloud platform contains all energy management & electrification applications in a single portal.

    Monitor & control all loads and generation assets to accomplish multiple energy goals, including minimizing CP Demand chargers.

  • EnergyX® Edge Kits provide onsite monitoring & control and a secure connection to the EnergyX® cloud platform.

    The EnergyX® Edge Control Kit can initiate automated responses to predicted system peaks