Commercial Electricity Rate Classes: GS-1, GS-2, GS-3 Explained

Most business owners have no idea what rate class they're in—and it's costing them money. I talked to a restaurant owner last month who'd been paying GS-3 rates for three years when she should have been on GS-2. That misclassification added roughly $400 to her monthly bill.

Note: your rate class determines whether you pay demand charges, what your base fees look like, and how much room you have to negotiate with suppliers. GS-1 covers small operations under 10 kW. GS-2 handles most restaurants and small manufacturers (10-200 kW). GS-3 is for the big players—200+ kW.

Get this wrong and you're overpaying by 15-25%. Get it right and you've got leverage.

GS-1 rates apply to the smallest commercial accounts—typically those with peak demand below 10 kW. This covers many home-based businesses, small professional offices, and tiny retail operations.

The pricing structure resembles residential rates: primarily energy charges (cents per kWh) without separate demand charges. Customer charges run lower too, typically $15-30 monthly versus $50-150 for larger rate classes.

Here's what trips people up: GS-1 customers often pay higher per-kWh rates than GS-2 customers. The utility assumes smaller accounts cost more to serve per unit of electricity. If your business grows and pushes past 10 kW regularly, you might actually save money by moving to GS-2—even with demand charges factored in.

Most small to medium businesses fall into GS-2, covering peak demand from 10-200 kW. This includes restaurants, small manufacturers, medium-sized offices, and retail stores.

The demand charge changes everything. GS-2 introduces two-part billing: energy charges for kWh consumed plus demand charges for your peak 15-minute kW draw. AEP Ohio's GS-2 demand charge runs about $8.50/kW. PECO's General Service hits $12.40/kW. These demand charges typically represent 30-50% of your total bill.

GS-2 customers get access to competitive supply options that GS-1 often can't access. Suppliers actively compete for medium commercial accounts, creating savings opportunities of $1,500-5,000 annually compared to utility default rates.

GS-3 handles heavy hitters—businesses with peak demand exceeding 200 kW. Manufacturing facilities, data centers, hospitals, and large retail operations typically qualify.

At this scale, demand charges dominate your bill, often reaching 50-70% of total costs. However, GS-3 customers gain significant advantages: lower per-kWh energy rates, access to real-time pricing options, and serious negotiating power with suppliers.

Large commercial accounts can also access interruptible rate programs, where agreeing to reduce consumption during grid emergencies earns rate discounts of 10-20%. Time-of-use rates become more attractive too—shifting operations to off-peak hours generates substantial savings when you're moving serious kilowatt-hours.

Your rate class appears on every utility bill, though finding it requires knowing where to look.

On AEP Ohio bills, look for "Rate Schedule" in the account details section—it shows GS-1, GS-2, or GS-3 explicitly. PECO lists it as "Rate" near the top of page one. Eversource shows your rate code (G-1, G-2, G-3) in the billing summary.

If your demand occasionally exceeds your rate class threshold, the utility might reclassify you automatically—sometimes without notice. Reclassification typically sticks for 12 months even if demand drops. Review your last 12 months of bills to spot any classification changes and verify you're in the appropriate tier.

Sometimes switching rate classes saves money, even when it seems counterintuitive.

Businesses barely exceeding GS-1 thresholds face a decision: stay in GS-1 with higher per-kWh rates, or move to GS-2 with lower energy rates but added demand charges. Run the math both ways using your actual consumption data. For businesses using 15,000+ kWh monthly with 15-20 kW demand, GS-2 often wins.

Demand management keeps you in lower rate classes. Stagger equipment startup times. Use timers to prevent multiple high-draw systems from running simultaneously. A restaurant that keeps demand under 10 kW saves the entire demand charge component—that's $1,000+ annually in avoided costs.

Your rate class affects which suppliers compete for your business and how aggressively they price.

GS-1 accounts have limited options—many suppliers set minimum usage thresholds that exclude the smallest accounts. Those who do compete often offer rates only marginally better than utility default.

GS-2 accounts hit the sweet spot. Suppliers actively pursue medium commercial load with competitive fixed rates, index-plus options, and blended pricing structures. Savings of 15-30% versus utility default are common.

GS-3 accounts get custom pricing. At this scale, suppliers negotiate directly rather than offering posted rates. Block-and-index structures, real-time pricing, and load-following contracts become available. The larger your load, the better your leverage.