And if you’re confused by the various abbreviations, I’ll try to help. Not trying to be demeaning, but sharing what others have shared with me.
Hopefully you already understand amps and volts, but just in case…
Volts: measurement of electrical potential.
Amps: measurement of electrical current.
Power is (volts) * (amps) and is an instantaneous measurement (rate) usually expressed as watts (W) or kW (watts / 1000). It is also acceptable to just carry through the units of volts and amps (1000 watts = 1000 volt-Amps = 1 kVA).
Energy is a cumulative total of average power (W, kW or kVA) over a time interval (typically hours). So consuming electricity at a rate of 1000 W for 1 hour equals 1 kWh of energy used.
The math really is this easy if all you’re electrical appliances are “resistive” loads like water heater and electric ovens. In that case, real power and apperant power are the equal, and the ratio of them (called the power factor) is equal to 1.
As mentioned earlier, some things like motors and fluorescent lights bring some black magic into the mix. For whatever reason, they have a power factor of something less than 1. In these cases the real power (volts * amps) is only a portion of the power that the utility must provide. The rest is called reactive power and is never expressed in watts, only in volt-amps-reactive or kilovolt-amps-reactive (VAR, kVAR). Apparent power is calculated using some relationship between real and reactive power, and is (nearly?) always larger than real power (watts). This can also be calculated using a known or estimated power factor. (Real power / power factor = apparent power). Apparent power units are always VA or kVA. Utilities want to minimize the reactive power they have to supply (i don’t know why) and so they sometimes penalize larger customers (factories and such) for having low power factors. Target (overall) power factors typically range from 0.8 to 0.95. But individual devices may have power factors of 0.2 or lower. Summary: kilowatts (kW) and kilovolt-amps (kVA) are similar but not usually the same.
Demand charge is something entirely different. The utility’s perfect scenario is supplying a fixed, predictable amount of power to the grid around the clock. Any time the demand changes, they have to load/unload generation capacity, etc. They also have to ensure that they have the infrastructure to support the entire system on peak energy days. The demand charge is how they do that. It “penalizes” users with high spikes in demand by charging them for their peak usage and enables the utility to install and maintain the infrastructure necessary to provide reliable power under peak loads. A 15 minute average is a common way to calculate a demand charge. Units would typically be watts (W, kW) or volt-amps (VA, kVA).
Time of use rates are structured to discourage high consumption during periods of peak demand and encourage more use when demand is low. In this way the utility can incentivize a more stable load pattern and possibly smaller infrastructure overall. Because they WANT you to use more power when demand is low, time of use rates are typically NOT used in conjuction with demand charges (i think).
Demand charges are entirely separate from consumption charges. For your situation, you should have a demand rate AND a flat energy rate. If your demand rate really is $3.85 per kVA for anything over 250 kVA, you’ll likely never notice. For example, i have a 200A, 240V main service. That’s 48,000 volt- amps or 48 kVA. I don’t think power factor even plays a role here (someone smarter than me can feel free to weigh in on this), but let’s assume it does (worst case) and my power factor is 0.5 (REALLY LOW) at peak load. That would give 96kVA… still less than half of the point that triggers a recalculation of the demand charge.
But this is only a portion of your utility bill. The other is your consumption which should still be calculated based on a total of kWh used. That rate is entirely separate from the demand rate.
I hope this was helpful… taken WAY longer to write this (on my phone) than i thought it would!