When it comes to electricity billing, especially for larger buildings, most utilities charge for both energy (how much you use, in kWh) and demand (how fast you use it, in kW). Your load factor is a key metric that helps explain how efficiently you're using power across the month.

What Is Load Factor?

Load factor is a measure of how steady your electricity use is.

• A load factor of 100% means your usage is perfectly flat—all day, every day.

• A lower load factor means your usage is spiky, with sharp peaks and low valleys.

You can calculate it like this:

(Total energy use in kWh) ÷ (Peak demand in kW × hours in the billing period)

The more volatile your load, the lower your load factor—and the more you'll pay in demand charges.

Why It Affects Your Costs

If you're on a rate that includes demand charges, your lowest cost per kWh comes when your usage is steady. That’s because you're using your full electrical capacity more efficiently. But if your load factor is low, a bigger portion of your bill goes toward demand charges, driving up your blended cost per kWh.

Choosing the Right Rate

If you have the option to choose between an all-energy rate and a demand-based rate, your load factor can tip the scales.

• High load factor? You may save money on a demand rate.

• Low load factor? An energy-only rate might be the better fit.

How to Improve Your Load Factor

• Stagger equipment start-up times instead of running everything at once.

• Turn off or reduce non-critical loads during known peak times.

• Review automation settings for HVAC, lighting, or pumps to avoid demand spikes.

A High Load Factor Isn’t Always a Good Thing

Sometimes, it means equipment is running longer than necessary. If you notice a sudden increase in your load factor, check for overridden schedules or changes in operational patterns.

Flatten and Lower the Curve

The goal is a high load factor with minimal energy use—not wasting energy just to improve load factor. Aim for steady, efficient consumption—not more of it.

Not Sure? Let’s Look at It Together

GRCL can help you assess your load factor, compare billing options, and identify practical ways to cut your demand charges—without disrupting your operations. Because if you’re not managing your energy, who is?

2-Minute Payback is GRCL’s weekly blog of energy-saving tips and tools for busy building managers. This post was written by Chuck Faulkner.

Why Load Factor Matters on Your Electricity Bill