Demand charges are imposed by the utilities in an effort to be fair to all their commercial customers. The need arises because not all businesses use energy the same way. Some businesses may have a need for high amounts of power for short periods of time while others may require a constant supply of power at a lower level. Demand charges can be a significant portion of the total bill. The term “power” applies to the rate of using energy. Power is measured in kilowatts (kW). Some utilities may have clauses in their rate schedules that base people's demand charges on a specified percentage of the highest kW usage during the preceding 11 months. Power factor charges may not be a large part of people's utility bill but it is important to be aware of them and take corrective action if the charges become significant. Installing capacitors and high power factor equipment can reduce power factor penalties.