Yes, you're reading it right. They charge separately for Usage (kWh), Generation (kW) and Delivery (kW), and the kW items above are billed based on the single largest use of power during peak periods anytime during the month. So at any point during the peak periods someone can mistakenly turn something on and WHAM, you've got a monster power bill and you don't even suspect it. All the compact fluorescent bulbs in the world can't make up for one mistake with a water heater, or heaven forbid, an A/C compressor or welder.
To add insult to injury, they have the following definition of "Demand" on their web site:
This component is part of the pricing for the Combined Advantage plans. "Demand" or kW is the average kW used during the 60-minute period of maximum use during the on-peak hours of the billing month. The kW used is determined from readings of your APS meter.
This is simply not true. I discovered the definition was wrong when I finished the system to measure power usage in real time. I never had an hour where I exceeded 2.4 kW and those periods were for a very short time, far less than an hour. However, when I got the bill they listed 2.2 kW as the demand. I called and asked why and they told me it was what the meter recorded. The meter reading is God.
So, I talked to the customer support people several times, the metering people several times, the meter manufacturer a couple of times and finally got an extensive manual on the meter itself. Armed with this I asked to talk to an engineer that understood their metering. Guess what? I actually got a call back!!
Even stranger, the engineer agreed with me. The definition on their web site was clearly wrong and they don't do any averaging; they take the highest demand and hold it over a month. I get billed for any mistake I make in power usage. The engineer agreed to discuss this definition with others and get a correct definition in place.
This was back on 8/24/2010. Still waiting, we'll see.