What’s the difference between business and residential electricity rates?

Businesses generally pay a lower energy charge per kilowatt‑hour than households because they use electricity at a larger scale. However, their bills include a demand charge based on the highest amount of power they draw at any one time. This charge helps utilities recover the cost of maintaining generation and distribution capacity to meet those peaks. Business tariffs may also change by time of day and season to reflect the underlying wholesale market, whereas residential rates are often flat or tiered. Finally, businesses in deregulated markets can choose from a variety of plans—fixed, variable and block & index—while residential customers typically see fewer options.