Transmission and distribution loss factors are used to determine the energy rates, by allocating a share of the losses to consumers.

The actual transmission losses (TLF) in each trading interval (normally 30 minutes) are calculated as the difference between energy put into the transmission network by generators and the energy out of the transmission network to customers. Distribution loss factors (DLFs) are used to allocate a share of the losses in a distribution network to the customer connected to that network.

1. Maximum demand

Electricity accounts may include a demand charge in the network (distribution) charges section. Electricity demand is the rate at which electricity is consumed, continuously averaged over 15 or 30 minute intervals. Two demand terms are:

• network or maximum demand: the highest demand recorded during the month
  
• contract or billed demand: the demand level at which the demand charges are based.
  

This is equal to the site's historical maximum demand, or the minimum chargeable demand, whichever is higher. Whenever the contract demand is exceeded by the maximum demand, then the current maximum demand becomes the new contract.

Actual demand and contract demand, showing how the contract demand changes when
actual demand exceeds the contract demand level. Image by Simon Gilmore.

As the demand charge makes up a sizeable percentage of an electricity bill, it is in your interest to have the charged demand as low as possible. Therefore, if your actual demand is consistently less than the contract demand and it is above the minimum chargeable demand, then you, the customer, should request a reduction in the charged demand.