Good point - the square root of KWH doesn't sound like the right dimensional units.
Again, the square root just doesn't make sense to me. Assume you have the exact same situation with 400 houses. Now the peak demand only goes up to about 130kW. Doesn't make sense to me. Especially if everyone has air conditioning, and its a hot, humid 110 degree Saturday.
It's an empirical formula, based on curve fitting. The units don't have to make sense. In 1963, in rural America, nowhere close to "everyone" had air conditioning.