Contract Power vs Maximum Demand: Which One Can You Actually Manage?

Talk about electricity bills for long enough and contract power and maximum demand get tangled together. Both are measured in kW, which makes it more confusing still. But the two are opposite in nature, and the ways of reducing them are completely different. Start without knowing which one you need to manage and you will spend money and time in the wrong place.

What is the difference between contract power and maximum demand?

Contract power is the capacity you promised to use, and maximum demand is the record of the hardest you actually drew. One comes out of your equipment and the other out of your operations. One changes only if you apply, and the other changes by itself every month.

The formula by which contract power is set is covered in detail in What contract power is, and which month's value remains as your maximum demand in What maximum demand is.

Why do the two terms keep getting confused?

Because they share a unit, they are printed side by side on the bill, and both are connected to the basic charge. On top of that, a fair number of the explanations in circulation mix "the basic charge follows your contract power" and "the basic charge follows your peak" without distinguishing between them.

To be precise, which of the two becomes the basis for your charge depends on the type of customer you are. So unless you first settle the question "which one is our factory", no explanation is about us.

Which of the two is the charge based on?

Article 68 of KEPCO's Basic Terms of Supply splits this into two branches. For customers covered by Article 68(1), billing demand is set by maximum demand; for customers covered by Article 68(2), it is set by contract power as it stands (in force 1 July 2026).

There is one misunderstanding that comes up often here. The explanation that "if a maximum demand meter is fitted, you pay by the peak" does not apply as such to low-voltage factories. For low voltage, even where a meter is installed because contract power is 20 kW or more, the customer is in principle covered by Article 68(2). The order in which the basic charge is actually calculated is set out step by step in How the basic charge is calculated.

What happens if maximum demand exceeds contract power?

An excess-use surcharge is applied. Under Article 67-3 of KEPCO's Basic Terms of Supply and Article 48-2 of the Implementation Rules (in force 1 July 2026), in a month where you use more than your contract power, an amount equal to the basic charge unit price multiplied by a factor is added as a surcharge. The first month in excess draws only a warning, and billing starts from the second.

What matters in the relationship between the two values is that what is looked at in judging an excess differs from one customer group to another.

For the same "excess", one side looks at the extent and the other at the frequency. So gauging your risk from someone else's case without knowing which customer group you are in will lead you astray. The detailed factor brackets of the surcharge, and how to set a safe floor when reducing contract power, are covered in How to change (reduce) contract power.

Which one should our factory manage?

If your peak over the past 12 months sits low, near 30% of contract power, manage contract power; if it sits right up against contract power, manage the peak. For customers covered by Article 68(1), 30% of contract power is the floor for billing demand, so at a factory that has dropped below it, lowering the peak further does not move the basic charge.

If yours is a factory with short operating hours, so that the peak alone is high while total consumption is low, you need to look at load factor as well for the judgement to be accurate.

What is different about the ways of changing the two values?

Contract power is changed on paper; maximum demand is changed on the shop floor. One is a procedure that only takes effect once you apply to KEPCO; the other changes next month's value simply by breaking up this morning's start-up order.

There is one more difference. Contract power has no concept of time of day, but maximum demand does. Under the proviso to item 1 of Appendix 3 of the Basic Terms of Supply (in force 1 July 2026), what counts towards billing demand is the maximum demand in the mid-peak and peak periods, and peaks in the off-peak period and on public holidays are excluded. So if you move operations to the night, only maximum demand comes down while contract power does not budge — the same measure works on the two values in entirely different ways.

The peak comes first in the order. You have to lower the peak first and confirm the capacity you actually need, and only then adjust contract power; that way the reduced contract power does not squeeze your operations. Do it the other way round and you are touching the harder-to-reverse side first. For the actual change procedure, please see How to change (reduce) contract power.

How do we tell the two values apart on the bill?

Contract power is written in the contract information section, and maximum demand in that month's consumption record section. Contract power is likely to have been the same number for years, while maximum demand changes from month to month. To see which of the two was actually multiplied into this month's basic charge calculation, look at the billing demand item.

Contract power determines not only the charge but also the contract type. On KEPCO's tariff table, Industrial (A) applies to contract power of 4 kW or more and under 300 kW, and Industrial (B) to the bracket of 300 kW or more (KEPCO Cyber Branch electricity tariff table, accessed September 2026). That said, exceptional combinations are observed in actual billing, so we recommend checking your own contract type separately in The difference between Industrial (A) and (B).