Utility Rate Classes Explained: Small Commercial, Large Commercial, C&I

What a rate class is

Every utility tariff sorts customers into classes, and each class has its own set of charges. Residential is one class. Non-residential is split into several, usually by size, and the size measure is almost always kilowatts of peak demand rather than kilowatt-hours of energy. The class determines three things that matter to a cannabis facility:

• Whether you pay a per-kW demand charge at all, and at what rate.
• The per-kWh delivery charge, which is usually lower in larger classes.
• The fixed monthly customer charge, which is usually higher in larger classes.

Classes also determine which optional schedules you can elect, such as time-of-use or high-load-factor rates, and in competitive states they can determine how a supplier prices your supply. The bill walk-through shows where the class code appears on a typical bill; it is often a short string like "SC-3" or "ML" near the account number.

How utilities assign classes

The mechanics vary, but there are three common patterns.

Measured peak over a lookback window. The utility watches your billed demand and moves you when your history crosses a threshold. This is the most common approach for medium and large commercial classes. The lookback is usually 12 months, and many tariffs require the demand to hold above the line for several consecutive months, or for some number of months out of twelve, before a change takes effect.

Consumption threshold for the smallest classes. For the small end, some utilities use kWh instead of kW, because small customers do not have demand meters. A class boundary at 2,000 or 3,500 kWh per month is typical.

Contract or connected load. A minority of tariffs, and many new-service applications, assign the class based on the demand you asked the utility to provide when you applied, or on the size of the transformer serving you. This is the pattern that catches new cannabis facilities, because the electrical service is sized for the finished build-out while the first phase draws a fraction of it.

Here is how four utilities that serve licensed cannabis markets draw their lines, taken from their own published schedules.

Two details in that table matter for a grow. ComEd defines its load classes on 30-minute demand [comed-rate-rds], not 15-minute, which slightly softens a lights-on spike. NV Energy uses demand "in any billing period" [nve-south-commercial-rates], which means a single bad month can move you up a class, while National Grid requires 12 consecutive months over the line to move you into SC-3 [ngrid-upstate-ny-rates], which means a facility that peaks over 100 kW eleven months a year stays in SC-2 with its higher per-kWh delivery charge.

Why the wrong class costs money

A class is a pricing structure, and each structure suits a load shape. Broadly:

• Small classes charge more per kWh and little or nothing per kW. They suit low, spiky, or intermittent loads where you do not want to pay for capacity you rarely use.
• Large classes charge less per kWh but add a demand charge and a larger fixed charge. They suit flat, high-load-factor loads that use their capacity around the clock.

An indoor grow is a high-load-factor customer. Flower rooms run 12 hours, veg rooms run 18, HVAC runs 24, and the result is a load that sits near its peak much of the time. That is exactly the load a larger class prices well. See peak demand vs. peak usage for the load-factor concept.

The wrong class hurts in either direction.

Too small. A facility held in a small commercial class because its demand history has not yet triggered a move pays a high per-kWh delivery charge on every one of its many kWh. At National Grid upstate, SC-2's delivery charge on the non-demand option is 11.345 cents per kWh, against a demand-based structure in SC-3 with per-kW charges of 15.62 dollars or less depending on voltage [ngrid-upstate-ny-rates]. For a 24-hour load, the per-kWh structure is often the more expensive one.

Too large. A facility placed in a large class by contract demand, transformer size, or a previous tenant's history pays that class's fixed charges and its per-kW demand charge on a demand it is not using. National Grid's SC-3 customer charge runs 870 to 1,600 dollars a month depending on voltage and carries a minimum kW charge of up to 624.80 dollars at secondary voltage [ngrid-upstate-ny-rates], before a single kWh is billed. NV Energy's LGS-2 basic service charge is 122.40 dollars a month against 15.80 for LGS-1 [nve-south-commercial-rates], a small gap, but LGS-2 also introduces seasonal on-peak demand charges that LGS-1 does not have.

NREL's survey of more than 10,000 U.S. tariffs found demand charges can account for 30 to 70 percent of a commercial customer's bill [nrel-demand-charge-survey], so the demand-charge structure of your class is not a rounding error. Our page on demand charges covers ratchets, which compound this: a ratchet can hold your billed demand up for 11 months, and a class assignment based on that ratcheted demand can hold the class up too.

A worked example

Every input here is assumed. Suppose a craft cultivator in NV Energy's southern territory builds out in two phases. Phase one is 4,000 square feet of flower canopy drawing a coincident peak of about 250 kW and 110,000 kWh per month. Phase two will add another 4,000 square feet a year later.

Assume the facility was connected on a service and contract sized for the full build-out, and the utility placed it in LGS-2 from day one. Under the January 2026 schedule, LGS-2 secondary service carries a 122.40 dollar basic charge, a 3.45 dollar per kW facilities charge, and seasonal demand charges [nve-south-commercial-rates]. LGS-1 carries a 15.80 dollar basic charge, a 4.60 dollar per kW facilities charge, and a flat 5.48 dollar per kW demand charge [nve-south-commercial-rates].

For a 250 kW peak:

• LGS-1 fixed and demand components: 15.80 + (250 × 4.60) + (250 × 5.48) = 15.80 + 1,150 + 1,370 = about 2,536 dollars per month before energy.
• LGS-2 fixed and demand components: 122.40 + (250 × 3.45) + seasonal demand. The schedule's summer on-peak demand charges for the large classes are the dominant cost in summer and reach into the low teens of dollars per kW [nve-south-commercial-rates]; assume a blended 6.50 dollars per kW across the year for this example. That is 122.40 + 862.50 + 1,625 = about 2,610 dollars per month before energy.

On these assumptions the difference is small in fixed and demand charges, roughly 75 dollars a month, and the real comparison turns on the energy rates and the on-peak structure of LGS-2, which bills a grow's afternoon HVAC ramp during the June through September 3 p.m. to 9 p.m. on-peak window [nve-south-commercial-rates]. A facility that can shift its lights-on to fall outside that window may do better in LGS-2 than LGS-1; one that cannot may do worse. The lesson is not that one class is always cheaper. It is that the answer depends on your load shape, and that the tariff's own assignment rule, demand in any billing period [nve-south-commercial-rates], means a single high summer month decides the class for you unless you check.

The demand charge estimator will run this arithmetic with your utility's actual charges.

How to request a class review

1. Pull twelve months of billed demand and energy. Interval data is better; see interval data and AMI meters. You want the highest 15- or 30-minute demand each month and the monthly kWh.
2. Find the class definitions in your tariff. They are usually in a section called General Terms and Conditions, Definitions, or Applicability, not in the rate schedule itself. ComEd, for example, defines its delivery classes in the Retail Customer Categorizations part of its general terms rather than in Rate RDS [comed-rate-rds].
3. Compare your history to the rule. Note whether the tariff uses measured demand, contract demand, or connected load, and what lookback it applies. Write down the months you crossed or fell below each threshold.
4. Ask the utility, in writing, which figure it used to assign your class and when it last reviewed the assignment. Utilities have business account representatives for this; the request is routine.
5. If you are on contract demand, ask to revise the contract. A phased build-out can often be served under a lower contracted demand with a step-up later. Do this before you sign the service agreement if you can; the new facility buildout FAQ has the questions to ask.
6. If a previous tenant's history set the class, ask for a fresh start. Some utilities will reset demand history on a change of occupancy; others will not, and the ratchet clears on its own schedule. Either way, get the answer in writing.
7. Re-check after any major change. An LED retrofit, a new chiller, or a room coming online changes your peak and may change your class.