Corporate Energy Procurement

Excess Capacity Charges UK: Your DCP 161 101

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. An organisation will be charged an out of contract rate as soon as they exceed capacity level – 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
  • Negotiate capacity charges with your supplier 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 recently, 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

The Smarter Business solution for excess capacity charges

At Smarter Business, we work with our clients to ensure that their energy capacity is set at an accurate level. We can help you manage your usage and energy budget, as well as negotiate with suppliers on your behalf for tariffs and plans that best suit your business. Get in touch with an energy expert today.