Electricity capacity charges

What a capacity charge is

Every electricity connection has a limit on how much power it can draw at once. For larger sites, that limit is written into the connection agreement with the distribution network operator (DNO), or an independent network operator, as an agreed supply capacity. Ofgem's decisions on network charging describe it as the Maximum Import Capacity (MIC), the maximum capacity the customer agrees to abide by in its connection agreement. Bills and suppliers also refer to it as the authorised or available capacity.

The network operator reserves that capacity for you and charges for it in pence per kVA per day, applied throughout the year. Your supplier collects the charge and shows it on your bill as a capacity or availability charge.

Capacity charges usually apply to larger supplies with half-hourly meters that are billed on a site-specific network tariff. Smaller sites on standard, smart or AMR meters do not usually see a separate capacity charge.

kVA, kW and maximum demand

Capacity is measured in kVA (kilovolt-amperes), not kW. The difference matters:

• kW is the real power your equipment uses to do work.
• kVA is the apparent power the network has to supply, which includes reactive power drawn by motors, transformers and some lighting.
• The ratio between them is the power factor. The lower the power factor, the more kVA you need for the same kW.

Your maximum demand is the highest kVA your site actually draws in a half-hour period. Because half-hourly meters record use every 30 minutes, your supplier and network operator can see your maximum demand each month and compare it with your agreed capacity. Some sites also pay a reactive power charge if their power factor is poor.

How the capacity charge is worked out

The calculation is simple in principle:

1. Your DNO publishes a capacity rate for your type of connection, in pence per kVA per day, in its use of system charging statement.
2. That rate is multiplied by your agreed capacity in kVA.
3. The result is charged for every day in the billing period, whether the site is busy, quiet or closed.

The rate depends on your distribution area and the voltage you are connected at. We do not publish figures, because they differ between network operators and change each charging year. Your DNO's charging statement, on its own website, sets out the current rates and the rules that apply to your connection type.

Because the charge is based on the agreed figure rather than what you use, a site with far more capacity than it needs pays for capacity it does not use, every day.

Excess capacity charges

If your maximum demand goes above your agreed capacity, an excess capacity charge applies on the amount of the excess, for the period in your DNO's charging rules. It shows on your bill as a separate line.

Exceeding your agreed capacity also matters for safety and reliability: the network has been reserved and built for the agreed figure. If your demand regularly runs above it, your network operator may expect you to apply for a higher agreed capacity, which can involve its own connection costs and works.

Common causes of an excess charge include new equipment, a change of use, an extension, EV charging added without a capacity check, or a poor power factor pushing kVA up.

Reviewing your agreed capacity

Capacity charges are one of the few lines on a large electricity bill that you can sometimes influence directly, by making sure your agreed capacity matches what your site needs. Before changing anything:

1. Find your agreed capacity. It is in your connection agreement and usually on your bill. Your supplier can confirm it.
2. Get your half-hourly data. Look at the maximum demand in kVA for at least the last 12 months, so seasonal peaks are included.
3. Compare the two. Note how much headroom you have between your highest demand and your agreed capacity.
4. Think about the future. Planned equipment, extensions, heat pumps or EV charging may need the headroom you have now.
5. Read your DNO's charging statement. It explains how and when the agreed capacity can be changed and what happens if you later need to increase it.
6. Ask your DNO. Reductions and increases are agreed with the network operator, not the supplier.

Reducing capacity is not automatically the right answer. Giving capacity back can mean that a later increase takes time and money, and a site that runs close to its limit risks excess charges. We cannot promise any reduction in your charges; the decision rests with you and your network operator, based on your own data.

Capacity charges, contracts and other charges

Capacity charges are part of the network costs on your bill, alongside distribution and transmission use of system charges. How they are passed on depends on your contract:

• On a fully fixed contract, the capacity rate may be fixed for the term or passed through; check the terms.
• On a pass-through energy contract, capacity charges are usually passed through at the DNO's current rates.

Either way, the charge is calculated on your agreed kVA, so moving supplier does not change it. Our guide to non-commodity costs explains the other network and policy costs, and business energy bills explained shows where capacity charges sit on a half-hourly bill.

If you are planning a bigger supply or a new site, our guide to new business electricity connections explains how capacity is agreed when the connection is made. Manufacturers and other heavy users can read more in energy for manufacturers.

Where to find your capacity and your network operator

You need two pieces of information to make sense of a capacity charge: your agreed capacity and who your distribution network operator is.

• Agreed capacity: shown on many half-hourly bills next to the capacity charge, and set out in your connection agreement. Your supplier can confirm the figure it is billing.
• Network operator: the first two digits of the 13-digit MPAN core are the distributor ID, which identifies the network area. Our guide to the MPAN number explains where to find it.
• Charging statement: each network operator publishes its use of system charging statement on its own website, with the current capacity and excess capacity rates for each type of connection.
• Maximum demand data: your half-hourly data, from your supplier or data collector, shows your peak kVA each month.

If the agreed capacity on your bill does not match your connection agreement, raise it with your supplier, because the charge is calculated on the billed figure.

How we can help

We act as an agent for Fidelity Energy, an independent business energy consultancy and broker, and introduce you to it. We help you gather the bills, connection details and half-hourly data needed to look at your capacity and your contract together. Fidelity Energy's services include half-hourly reporting, bill validation and meter operator contracts, and it gets quotes from its network of business energy suppliers. Any change to your agreed capacity is made with your network operator.

Want to understand the capacity charges on your half-hourly bill, or get a quote for a half-hourly site? Contact us. To compare offers or change supplier, see business energy comparison on our sister site.