Excess capacity charges UK: Time is running out until the new DCP (Distribution Change Proposal) 161 legislation comes into force on 1 April 2018. The introduction of the Office of Gas and Electricity Markets (OFGEM)’s excess capacity tariffs will affect the electricity charges of many UK business.

What is DCP 161?

Under DCP comes the introduction of excess capacity penalties for entities that exceed their agreed capacity level. As soon as an organisation exceeds capacity level, they will be charged an out of contract rate - this could be up to three times higher than the current rate!

Why the change?

Under current legislation, organisations that exceed available capacity are not charged any penalties, only for the excess energy used. This means that, until now, users have never been incentivised to actively review their allocated capacity, putting strain on the system.

By charging customers for excess capacity levels, the DNOs (Distribution Network Operators) are able to recover the costs incurred when customers exceed their available capacity. Implementing these excess capacity charges will also help DNOs to better balance the usage of their networks.

What are the proposed excess capacity charges in the UK?

The excess capacity charge rates will vary by voltage and region - in areas with higher demands for capacity the costs are expected to be higher. There is a significant variance in excess capacity charges from region to region - with industry estimates between 49% - 177% for low voltage customers, and 13% - 165% for high voltage sites.

What about my electricity meter?

Companies with high energy consumption are now required to use smart meters (provided by energy suppliers) that provide a half-hourly (HH) measurement. The HH measurement is used to calculate excess capacity charge. Electricity meters that have been or are due to be converted to HH will be settled on the HH market in time for the introduction of DCP 161.

What can businesses do to avoid excess capacity charges in the UK?

Take energy savings measures to reduce your maximum energy demand

If your contract is up for renewal before April 2018, negotiate capacity charges now

Check that your agreed capacity level is set at an accurate level

Understand what your available capacity is, and what your maximum energy demand looks like

If you have a site which has only become half-hourly settled through the P272 process recently, take the time to ensure that the available capacity was set at a suitable level

If you can’t reduce your current demand, you need to apply to the DNO for a capacity increase