Utility rate optimization is the work of keeping every meter and account on the cheapest published rate and supply terms it qualifies for, then rechecking that fit as load, sites and tariffs change. Some teams call it energy rate optimization. The core is a utility tariff analysis, meter by meter, across the rate schedule, demand charges, time-of-use pricing, power factor and, where the state allows retail choice, the supply contract.
Demand alone shows the stakes. A 2017 National Renewable Energy Laboratory (NREL) survey of more than 10,000 utility tariffs, and NREL’s release on it, say demand charges in many cases can account for 30% to 70% of a customer’s electricity bill.
RadiusPoint’s Utility Expense Management (UEM) covers electricity, gas, water, sewer and waste in its ExpenseLogic platform, with meter-level contract and tariff rate audit.
Key Takeaways
- Six levers set what a meter pays, from the rate schedule and demand charges to power factor terms and, in retail-choice states, the supply price.
- The tariff, not a rule of thumb, sets the demand interval, the power factor minimum and any ratchet.
- In two published RadiusPoint cases, moving utility services in 4 deregulated states cut costs by 4% to 13% depending on location, and 150 service locations moved to contract rates. Both are supply results, not rate-class filings.
Short version: gather 12 or more months of usage and peak demand per meter, read each tariff’s availability, demand and power factor terms, and recheck fit whenever load, the tariff or a supply contract changes.
When Does Energy Rate Optimization Include the Supply Contract?
Energy rate optimization includes the supply contract only where the state allows retail choice, since some states’ utility commissions fully regulate electricity prices. The US Energy Information Administration (EIA) says other states combine unregulated generation prices with regulated transmission and distribution prices, which is where a supply contract can be bid.
Two published RadiusPoint cases show the returns. The first client, a national eyeglass and contact lens manufacturer and retailer, had 170 retail locations and 3 labs. Working from at least 6 months of invoices, RadiusPoint requested proposals based on actual usage, and its UEM team analyzed the competing bids. The client’s management decided to move its locations’ utility services in 4 deregulated states, and the client cut utility costs by 4% to 13% depending on location.
The second, a nationwide facility maintenance company with over 500 service locations, handled 1,300+ invoices a month. Once RadiusPoint reported actual kilowatthours (kWh) and therms by meter, management could get new bids in deregulated states. RadiusPoint moved 150 service locations to contract rates, locations already under contract are monitored to move at contract expiration, and the published case reports over $40,000 in savings.
Neither case changed a rate class. Both changed the supply price, the work of utility procurement in retail-choice states.
What Does a Utility Tariff Analysis Check, Lever by Lever?
A utility tariff analysis checks each meter’s rate schedule, demand charges, time-of-use pricing, power factor terms, fixed charges and supply price against its load. The US Department of Energy-funded OpenEI Utility Rate Database shows the range: rate structure information for over 3,700 US utilities, covering time-of-use rates, demand charges, tiered rates, fixed monthly fees and adjustment riders.
Each row names the record that proves fit.
| Lever | What the tariff bills on | What changes the cost | Record that proves fit | Site page that goes deeper |
|---|---|---|---|---|
| Rate schedule or rate class | Charges and prices for customers who meet its availability terms | Load size, service voltage and load shape | Rate code on the bill; the tariff’s availability section; 12 or more months of usage and peak demand by meter | Utility rate reclassification |
| Demand charge and any ratchet | Peak kilowatts (kW) in the interval the tariff sets; a ratchet sets a billed-demand minimum tied to an earlier peak | The month’s highest interval; an earlier peak a ratchet carries forward | Billed and metered kW; the tariff’s definition of billing demand; 12 or more months of peak demand by meter | Utility bill audit |
| Time-of-use energy charge | kWh priced by time periods the tariff defines | Share of kWh in higher-priced periods | The tariff’s time periods; kWh by period on the bill | Demand planning and forecasting |
| Power factor charge | A charge or demand adjustment below the tariff’s power factor minimum | The site’s power factor against that minimum | Power factor or reactive power (kVAR) line; the tariff’s definition of demand | Energy audits |
| Customer or fixed charge | A fixed monthly amount per account or meter | Number of meters and accounts billing | Customer charge line per meter; the meter list | Utility meter inventory |
| Supply price in a retail-choice state | Supply price per kWh or therm, set by contract | Contract price, term and expiration | Supply contract with rate and expiration date; supply line on the bill; usage by meter | Utility procurement |
How Do You Know a Meter Is on the Right Rate Schedule?
A meter is on the right rate schedule when no other schedule it qualifies for would cost less for the same 12 months of load. Service level shapes that answer. EIA says industrial customers use more electricity and can receive it at higher voltages, so supplying them is more efficient and less expensive.
EIA puts the 2025 US annual average retail price at about 13.63 cents per kWh, against 13.41 cents for commercial and 8.62 cents for industrial customers. No single site should expect the industrial price, but voltage, size and load shape decide which schedules a meter can take.
A tariff’s availability section says who can take a schedule, and its terms say whether a customer must stay on it for a minimum period. Read both before asking for a change. Public and municipal accounts are billed on published tariffs too. Moving a meter to another class is a utility rate reclassification: a filed request, backed by load data, that the utility must approve.
Demand Charges Are Set by One Interval, and a Ratchet Can Hold Them There
A demand charge bills the highest average kilowatt demand in one tariff-defined interval each billing period, and a ratchet can carry an earlier peak forward. NREL’s 2017 survey says the interval is usually 15 minutes; a Massachusetts state fact sheet says typically 15, 30 or 60 minutes. The tariff sets it.
NREL estimated that nearly 5 million US commercial customers, over a quarter of about 18 million, can subscribe to tariffs with demand charges above $15 per kW. That counts customers who can choose such a tariff, not customers on one. Behind-the-meter batteries, the subject of NREL’s survey, can lower the peak itself.
A ratchet, where a tariff has one, sets a minimum billed demand tied to an earlier peak, using the percentage and look-back period that tariff defines, so one high interval can raise billed demand in later months. Checking billed kW against metered kW, multiplier included, is part of a utility bill audit. Rate optimization asks whether another schedule would cost less for the same peaks. ExpenseLogic’s demand multiplier calculations support kilowatt analysis, relevant to retail and hospitality sites.
Will a Time-of-Use Rate Lower Your Bill?
A time-of-use rate lowers a meter’s bill when enough of its usage falls in the lower-priced periods the tariff defines, so load shape decides. EIA says some utilities offer time-of-day pricing to encourage conservation and reduce peak demand. Compare the tariff’s periods with each meter’s kWh by period before switching.
A site that runs mostly in on-peak hours can pay more after a switch, and some time-of-use schedules carry demand charges too. Forecasting load before a change is the subject of demand planning and forecasting. In deregulated markets, RadiusPoint’s utility procurement work includes time-of-use, demand response and green energy procurement.
Power Factor Charges Follow the Minimum Your Tariff Sets
A power factor charge applies when a site’s power factor falls below the minimum its tariff sets, and that minimum differs between utilities and schedules. The US Department of Energy (DOE) says many utilities charge an additional fee below 0.95. A Massachusetts fact sheet says providers there typically require 90% or above.
In DOE’s worked example, raising a 100 kW load from 0.70 to 0.95 power factor with a capacitor cuts apparent power from 142 to 105 kilovolt-amperes (kVA), a 26% reduction in current. The Massachusetts sheet adds two cautions: check your rate’s definition of demand to see whether power factor affects billed demand, and know that raising power factor above the required minimum won’t lower demand charges. Correction equipment is a site project that energy audits can identify.
How RadiusPoint Supports Utility Rate Optimization in ExpenseLogic
RadiusPoint supports utility rate optimization through Utility Expense Management in ExpenseLogic, with meter-level contract and tariff rate audit across electricity, gas, water, sewer and waste. The model is software plus people: RadiusPoint staff work the invoices and the exceptions, and the audit runs at meter level, not account level.
ExpenseLogic receives and validates utility invoices with line-item detail on every charge. Its meter-level audit covers contract and tariff rate audit, consumption-based audit and threshold-based audit. Utility analysis reporting compares sites and dates, cost allocation runs to location, department and meter number, and the Contract Management module keeps contract images and terms.
Every rate review starts from an accurate utility meter inventory. RadiusPoint’s Utility Expense Management also includes utility procurement in deregulated markets, a help desk with site open and close services, and Vacant Cost Recovery, and RadiusPoint can pay vendor invoices for clients once the client funds the account.
A rate review won’t catch a closed site that’s still billing. In one published RadiusPoint case, a multi-location retailer paid $1,500 a month ($18,000 a year) for electricity, gas and water at a closed location until RadiusPoint identified the site, had services disconnected and flagged it in ExpenseLogic. That’s site open and close control, not rate work.
Each month a meter stays on a schedule it no longer fits, the price gap repeats. Request a free demonstration of ExpenseLogic’s meter-level utility audit and Reporting and Analytics.
Frequently Asked Questions
How often should we check whether our utility rates still fit?
Check a meter’s rate whenever its load changes, a site opens or closes, the utility revises its tariff or a supply contract nears expiration, and review the whole portfolio on a set schedule. Any minimum term in the tariff limits how often a meter can switch.
Can we get money back if a meter was on the wrong rate?
A rate change lowers future bills; it doesn’t by itself refund past ones. Past money comes back when a charge was wrong under the tariff that applied, or where tariff or state rules allow an adjustment, which is the work of utility expense recovery.
Is utility rate optimization the same as a utility bill audit?
No. A bill audit tests whether a bill was calculated correctly under its tariff, including multipliers, consumption and ratchet math. Utility rate optimization asks whether that tariff and the supply terms behind it are the cheapest the meter qualifies for, so a utility tariff analysis checks fit, not just accuracy.
What data does an energy rate optimization review need?
An energy rate optimization review needs 12 or more months of usage and peak demand for each meter, recent bills with rate codes, and each meter’s current tariff sheet with its availability, demand and power factor terms. In retail-choice states, add each supply contract with its rate and expiration date.
References
- National Renewable Energy Laboratory (NREL) and Clean Energy Group, “Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges,” NREL/BR-6A20-68963, August 2017. osti.gov
- National Renewable Energy Laboratory, “Analysis identifies where commercial customers might benefit from energy storage,” news release, August 29, 2017, as published by ScienceDaily. sciencedaily.com
- US Energy Information Administration, “Electricity explained: Prices and factors affecting prices,” 2025 prices from Electric Power Monthly, February 2026 (preliminary data), accessed October 2026. eia.gov
- OpenEI, “Utility Rate Database,” funded by the US Department of Energy, accessed October 2026. openei.org
- US Department of Energy, “Reducing Power Factor Cost,” fact sheet DOE/GO-10096-286. energy.gov
- Massachusetts Office of Technical Assistance and Technology, “Understanding Your Electric Bill: Saving Money on Demand Charges and Power Factor,” fact sheet, mass.gov, accessed October 2026. mass.gov
- RadiusPoint, “Utilities Expense Optimization Saves as Much as 13%,” March 4, 2023.
- RadiusPoint, “Cost Avoidance & Savings: $40K in UEM Cost Optimization,” October 18, 2022.
- RadiusPoint, “Utilities Mismanagement Costs $18K in Unnecessary Expenses.”
This article is general information for finance, facilities and energy managers, not engineering, legal or regulatory advice. Demand intervals, power factor minimums, ratchet provisions and switching terms vary by utility and rate schedule, so confirm them in your utility’s current tariff. RadiusPoint results cited here come from specific published client engagements on the case pages listed in References, and results vary by organization.