Utility companies impose a surcharge based on what factor?

Utility companies impose a surcharge based on peak power demand because this factor reflects the highest level of electricity consumption during specific periods, typically during peak hours when demand surges. This is a crucial consideration for utility companies, as they need to ensure that sufficient capacity is available to meet the highest demand levels. When consumers exceed certain thresholds of peak demand, it can strain the electrical grid and require the utility company to invest in additional infrastructure or generation capabilities, which is why they implement surcharges.

The surcharges are designed to encourage customers to manage their power consumption more effectively and potentially shift their usage patterns to times of lower demand, which benefits both the consumer and the utility by helping to stabilize the grid and reduce costs associated with providing peak power.