The advent of smart meters and the additional data they provide means that utilities can consider expanding the use of demand charges to residential customers. However, great caution should be applied when considering this option, as severe cost shifts may occur. Writing for Natural Gas & Electricity journal, Jim Lazar explored the key issues to keep in mind when considering a residential demand charge: diversity of usage, impact on low-use customers, the presence of multifamily dwellings, and time variation. Demand charges are only an approximation of a customer’s contribution to system capacity costs, because they measure individual highest usage during the course of a month without considering whether that usage was coincident with a system peak. Customers’ usage patterns vary more widely than can be accurately captured by a demand charge, and the impact on low-use customers and apartment dwellers is disproportionate. A time-varying rate design allocates costs more equitably, makes bills more predictable, and is easier for customers to understand.