Why separate energy charges (price per kWh) and demand charges (price per kW)?

Electric utilities are sized to meet the maximum usage that all customers of the system may need at any one point in time throughout the year. Separating energy and demand charges, when possible, is important since energy charges are related to total consumption of electricity over a period of time, while demand charges are related to the highest level of electric use at one point in time during a billing period.