Ben Brading 7 min read

Maximum demand: Capacity and excess capacity charges

Commercial properties that consume a lot of electricity pay capacity charges, which are calculated based on their maximum demand for electricity.

This guide explains the concept of maximum electricity demand and how it is used to calculate capacity and excess capacity charges.

Here’s a high-level summary with links to the key sections of this article:

Maximum Demand – The highest amount of electricity used by your business during any 30-minute interval, as recorded by a half-hourly meter.
Maximum Import Capacity – The maximum demand your business can draw from your electricity connection, as agreed with the local grid operator.
Capacity Charges – A monthly fixed charge to guarantee the availability of your Maximum Import Capacity.
Excess Demand Charge – An additional charge that is levied if your actual Maximum Demand is greater than your Maximum Import Capacity.

Understanding maximum demand

In business energy contracts, demand refers to the amount of electricity consumed by a commercial property, measured in 30-minute intervals.

Demand is automatically monitored and recorded by half-hourly business electricity meters installed at all commercial properties that consume large amounts of power.

Maximum demand is the highest recorded half-hourly demand during a monthly billing period and is measured in kilowatts (kW).

What is the purpose of demand-related charges?

The national grid and local electricity grid operators must continually balance demand on the grid with electricity generation and imports to avoid blackouts.

To help manage the grid, local distribution network operators agree on a maximum available power demand for commercial properties that consume large amounts of power, known as the Maximum Import Capacity.

The local grid operator guarantees that the Maximum Import Capacity will always be available to the property but does not guarantee power availability above this limit.

All half-hourly metered customers pay a capacity charge proportional to their Maximum Import Capacity. This encourages commercial properties to release unused capacity, allowing it to be used elsewhere on the grid.

Maximum Import Capacity

Maximum Import Capacity is the maximum electricity demand your business can draw from the grid in any half-hourly period, as agreed with your local distribution network operator.

Confusingly, Maximum Import Capacity is measured in kilovolt-amperes (kVA) and not kilowatts (kW). kVA measures apparent power, which includes both the real power (kW) that performs actual work and the reactive power that supports the voltage levels in your electrical system.

In a 100% efficient system, kVA (apparent power) equals kW (real power). However, since most systems are not fully efficient, a typical conversion factor of 95% (or a power factor of 0.95) is used. This means that kW is approximately 95% of the kVA value, and the formula is as follows:

Maximum Import Capacity (kVA) x 0.95 = Maximum Demand (kW)

This accounts for energy lost in the system, typically due to factors like resistance and inefficiencies in the electrical network.

Your Maximum Import Capacity is usually shown on your electricity bills. If you can’t find it, you can ask either your distribution network operator or electricity supplier.

💡 Other names used for Maximum Import Capacity are Available Supply Capacity (ASC) or Maximum Power Requirement (MPR).

How to change the Maximum Import Capacity

When you set up a new business electricity connection, you will agree on a Maximum Import Capacity with your distribution network operator.

The Maximum Import Capacity can be changed by contacting your distribution network operator as follows:

Decrease in Maximum Import Capacity – A decrease in Maximum Import Capacity is usually free and will reduce your monthly capacity charges. The released capacity will be made available to other connections on the network.
Increase in Maximum Import Capacity – An increase in Maximum Import Capacity requires an application and will increase your monthly capacity charges. An increase request must be approved to ensure there is sufficient capacity on your local grid.

To change the Maximum Import Capacity of your connection, you will need to provide the following details about your connection:

Company information
Site address
MPAN
Existing capacity
Proposed capacity
Letter of Authority (if your energy broker is doing this on your behalf)

💡Maximum Import Capacity can only be changed once every 12 months.

How to determine a Maximum Import Capacity

When changing the Maximum Import Capacity of your business electricity connection, it’s vital to consider both current and future power requirements.

Current demand requirements can be assessed by reviewing your half-hourly meter data for Maximum Demand recorded in the past year.

The Maximum Import Capacity should also consider long-term expected power requirements. You should set the Maximum Import Capacity so that your electricity demand never exceeds it.

Local grid operators cannot guarantee the availability of additional or relinquished capacity, so it’s crucial not to release capacity your business may need in the future.

Capacity charges

Capacity charges are levied by your distribution network operator to guarantee the Maximum Import Capacity on your electricity connection.

Capacity charges typically range between 70p and 150p/kVA of available capacity each month.

Capacity charges are one element of Distribution Use of System (DUoS) charges, which are charged for using the electricity grid.

How capacity charges work

Capacity charges are paid to your local distribution operator by your business energy supplier, who will pass these on through your monthly bills.

The capacity charges are determined by your Maximum Import Capacity and the distribution fees of your regional distribution network operator.

Capacity charges per kVA of available capacity are directly regulated by Ofgem and are updated annually.

Calculating capacity charges

Capacity charges are usually shown separately on the business electricity bills of commercial properties with half-hourly meters.

Here’s an example of how the capacity charge is calculated on your bill:

Maximum Import Capacity: 105 kVA (As agreed with your DNO)
Capacity charge: 2.5p/kVA/day (As determined by Ofgem)
Monthly capacity charge: £78

The monthly capacity charge is the Maximum Import Capacity multiplied by the unit capacity charge and the number of days in the month.

Excess capacity charges

Excess capacity charges occur in a month when your Maximum Demand exceeds your Maximum Import Capacity.

The excess capacity charge is applied for each kVA of additional demand used and is levied for the entire month in which the Maximum Import Capacity is breached.

Calculating excess capacity charges

An excess capacity charge is calculated as follows:

Maximum Demand: 130 kVA
Maximum Import Capacity: 105 kVA
Excess capacity: 25 kVA
Excess capacity unit charge: 2.5p (pence/kVA/day)
Excess capacity for the month: £18.75

How to avoid excess capacity charges

There are two ways to avoid excess capacity charges:

Increase your Maximum Import Capacity – See above for the process of applying for additional Maximum Import Capacity from your local grid operator.
Reduce your Maximum Demand – Improve energy efficiency to use less energy, or use load management to shift the timing of electricity consumption to reduce Maximum Demand.