How to avoid the new electricity capacity penalties

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From April 2018, larger business energy consumers could face stiff penalties if they exceed their agreed supply capacity (ASC). For persistent offenders who have more demand than allowed for in their electricity connection agreement, this could add as much as 2% to their bill.

The ASC is essentially the maximum demand that the District Network Operator (DNO) allows customers to import from the network to their meters

What is DCP161?

The changes are being introduced by energy regulator Ofgem under a new measure called DCP161 and affect those using half-hourly electricity supplies.

At present, if a company exceeds its ASC, there's no penalty other than a charge for the excess demand at the standard rate. Under DCP161, the new excess penalty could be three times higher than this standard rate.

For those companies that regularly exceed their capacity quota, it is predicted that DCP161 could increase the final electricity bill by 1 to 2%. In addition, they may be at risk of loss of power should their supply be located on a constrained network.

How can you avoid DCP161 penalties?

DCP161 works on the same principle as paying for exceeding your mobile phone data allowance, and requires the same careful tracking of data to avoid being 'stung' by high extra costs.

Any sites that frequently incur excess capacity charges will need to increase their capacity or take energy saving measures to reduce their maximum demand, so it is important to measure consumption data to understand your maximum electricity demand.

1. Prepare now by reviewing your capacity levels

Start preparing now by understanding the implications of these costs so you can reduce them where possible and budget accordingly. Firstly, you need to understand what level your agreed capacity is set at, and check whether your business regularly hits or exceeds its ASC, to identify whether you are likely to be impacted by DCP161.

2. Higher or lower?

Don't be tempted into setting your ASC too high. Although you will avoid penalties, you will still pay for unused capacity. You can apply to the DNO to increase or decrease your limit at any point, although there may be limitations under the terms of your local DNO. Do factor in plans for business development and how this may impact on your future consumption levels.

3. Watch out for new meters

Following the introduction of recent P272 regulations, more businesses are moving from non-half hourly to half-hourly meters. Any businesses using new meters must ensure that they are aware of their agreed supply capacity and that it aligns accurately with their existing and predicted future energy demand.

4. Reduce your electricity consumption.

One of the most effective ways of avoiding excess charges is to reduce your electricity consumption, particularly peak demand. This will have a dual benefit in reducing overall electricity costs. If you can't reduce your overall demand, you could consider changing your patterns of energy usage to avoid triggering any excess.

5. Take a strategic approach

Capacity planning must form an integral part of your energy strategy. It should be regularly reviewed and monitored as part of your energy procurement, management and monitoring activities.

About Richard Smith

Richard Smith

Richard Smith is the Director of Business Strategy at Inprova Energy, where he leads energy and water management services across the private and public sectors. 

His career in the energy management, building controls and FM sectors spans more than 25 years, including senior roles at Mitie, Veolia, Honeywell and Balfour Beatty.

Inprova Energy is one of the UK's top ten business energy procurement and management consultancies – specialising in energy and water auditing and management, business energy purchasing and analysis, carbon reduction and reporting, and legislative compliance. Its chartered advisers are qualified ESOS Lead Assessors, and certified to deliver Carbon Trust Standard, ISO 50001 and carbon footprint measurement services.

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