Business Electricity Capacity Charges Explained
Learn how agreed electricity capacity can affect costs for larger and half-hourly commercial sites.
What an Electricity Capacity Charge Is
An electricity capacity charge is a cost applied to a commercial electricity contract that relates to the level of supply capacity reserved at a premises, rather than the amount of electricity actually consumed. It reflects the cost of maintaining the network infrastructure needed to deliver electricity up to the agreed maximum level at any given moment.
Capacity charges are distinct from unit rates, which are applied to the electricity consumed in kilowatt-hours. A business may incur capacity-related costs regardless of how much electricity it uses, because those costs are associated with the availability of the connection rather than its utilisation.
The specific structure and labelling of capacity-related charges varies between suppliers and contract types. They may appear under headings such as capacity charges, availability charges, demand charges or similar terms. If you are unsure how capacity-related costs are reflected on your electricity contract, your supplier can provide a breakdown.
Capacity charges are separate from unit rates. They are incurred based on the level of supply capacity reserved at the premises, not the amount of electricity consumed.
This diagram is illustrative only. The actual proportion of each charge varies significantly by contract type, supply size, agreed capacity and market conditions. Capacity charges are one element of the total contract cost and their relative weight depends on the specific supply.
Agreed or Authorised Supply Capacity
The agreed supply capacity — sometimes referred to as the authorised supply capacity or import capacity — is the maximum level of electrical power that the distribution network operator has agreed to make available at a supply point. It is a contractual arrangement between the business and the network operator, and it determines the size of the connection infrastructure at the premises.
The agreed capacity is set when the electricity connection is first established and can be changed subsequently, subject to an application to the network operator. Changes to agreed capacity may involve an assessment of the existing connection infrastructure, potential reinforcement work and associated costs. The process can take a significant amount of time, and the implications should be understood before any changes are initiated.
The agreed capacity is recorded against the Meter Point Administration Number (MPAN) for the supply point. When obtaining contract quotations, suppliers will typically take the agreed capacity into account when calculating the capacity-related elements of the contract.
The agreed capacity is recorded against your MPAN. When switching supplier, the agreed capacity remains unchanged — a new supplier takes on the supply at the existing level.
How Capacity Is Commonly Expressed in kVA
Electricity supply capacity is typically expressed in kilovolt-amperes (kVA), which is a unit of apparent power. kVA reflects the total electrical power being drawn from the network, including both the active power that does useful work and the reactive power associated with the characteristics of the electrical load.
The use of kVA rather than kilowatts (kW) to express supply capacity reflects the fact that the network infrastructure must be sized to handle the total apparent power demand, not just the active power component. The relationship between kVA and kW depends on the power factor of the electrical load at the premises.
For a more detailed explanation of the relationship between kVA and kW, see our guide: kVA and Maximum Demand Explained.
For a plain-English explanation of kVA, kW and the power factor relationship, see our guide: kVA and Maximum Demand Explained.
Relationship to Maximum Demand
Maximum demand is the highest level of electricity consumption recorded at a supply point within a defined measurement period. For half-hourly metered supplies, it is typically derived from the half-hourly consumption data and expressed in kW or kVA.
The relationship between the agreed supply capacity and the recorded maximum demand is relevant to capacity charges. Where the agreed capacity is significantly higher than the recorded maximum demand, the business may be paying capacity-related charges for a level of supply that it does not use. Where the recorded maximum demand approaches or exceeds the agreed capacity, there may be operational and financial implications.
Reviewing the relationship between agreed capacity and recorded maximum demand is one element of a broader assessment of whether the capacity arrangements at a premises remain appropriate for current operational requirements.
For more on how maximum demand is measured for half-hourly supplies, see: Half-Hourly Electricity Meters Explained.
Why Capacity Requirements Vary Between Sites
The electricity capacity requirements of a commercial premises depend on the nature of the business, the equipment installed, the operating hours and the pattern of electrical demand across the day and year. A manufacturing facility with heavy machinery will typically have very different capacity requirements from an office building or a retail unit.
Capacity requirements can also change over time as a business grows, contracts, changes its operations or installs new equipment. A premises that was originally connected with a capacity appropriate for its operations at the time may have a different profile of requirements years later.
For businesses operating across multiple sites, capacity requirements and the relationship between agreed capacity and actual demand may vary significantly between supply points. A portfolio-level review can help to identify sites where the capacity arrangements may warrant closer examination.
Possible Consequences of Exceeding Agreed Capacity
Where the electricity demand at a premises exceeds the agreed supply capacity, the distribution network operator may apply excess capacity charges. These charges are intended to reflect the additional cost to the network of delivering power beyond the agreed level and can be significant.
In more serious cases, where demand consistently or significantly exceeds the agreed capacity, the network operator may take steps to restrict or interrupt the supply. This can have serious operational consequences for businesses that depend on a reliable electricity supply.
If you believe that the electricity demand at your premises may be approaching or exceeding the agreed supply capacity, we recommend consulting a qualified electrical engineer and contacting your distribution network operator to discuss your options. Free Energy Help can assist with reviewing the capacity information associated with your supply point.
Why Unused Capacity Should Be Reviewed Carefully
Where the agreed supply capacity at a premises is significantly higher than the recorded maximum demand, the business may be incurring capacity-related charges for a level of supply that it does not use. In some cases, the agreed capacity may have been set at a high level to accommodate equipment or processes that are no longer in operation, or to allow for expansion that has not materialised.
However, any review of whether the agreed capacity can be reduced should be approached with care. Reducing capacity without a thorough assessment of current and future site requirements carries the risk of creating operational problems if demand subsequently increases. Changes to agreed capacity can take time and may incur costs, and reversing a reduction is not always straightforward.
We strongly recommend that any consideration of reducing agreed capacity is conducted with input from a qualified electrical engineer who can assess the site's electrical installation and operational requirements, and in consultation with the distribution network operator. Free Energy Help does not provide electrical engineering advice and cannot amend network capacity arrangements on behalf of customers without the involvement of the relevant third parties.
Free Energy Help does not provide electrical engineering advice and cannot amend network capacity arrangements without the involvement of the relevant third parties. Any capacity reduction must be assessed by a qualified electrical engineer.
Role of the Distribution Network and Supplier
The agreed supply capacity is a matter between the business and the distribution network operator (DNO) for the area in which the premises is located. The DNO is responsible for the electricity distribution infrastructure and for agreeing and maintaining the connection capacity at each supply point.
The electricity supplier is a separate party that purchases electricity on behalf of the customer and manages the commercial contract, including the billing of capacity-related charges. The supplier will typically reflect the agreed capacity in the contract terms and charges, but the capacity itself is determined by the arrangement with the DNO.
When switching electricity supplier, the agreed supply capacity at the premises remains unchanged unless a separate application is made to the DNO. A new supplier will take on the supply at the existing agreed capacity level.
Information Needed for a Capacity Review
A meaningful review of the capacity arrangements at a commercial premises typically requires a number of pieces of information. The agreed supply capacity recorded against the MPAN is a starting point, along with the recorded maximum demand for the supply point over a representative period.
For half-hourly metered supplies, the half-hourly consumption data provides a detailed record of demand across every 30-minute period and is particularly useful for understanding the demand profile and identifying peak demand periods. This data can be obtained from the current supplier or the data collector for the supply point.
A qualified electrical engineer will also need to assess the site's electrical installation, the equipment loads and the operational patterns of the business. This on-site assessment is an essential part of any professional capacity review and is beyond the scope of the energy procurement advice that Free Energy Help provides.
Why Changes Require Proper Technical Assessment
Changing the agreed supply capacity at a commercial premises is not a straightforward administrative process. It involves an application to the distribution network operator, an assessment of the existing connection infrastructure and potentially significant work to modify the connection. The process is governed by the network operator's connection terms and the relevant industry codes.
The technical assessment required before any capacity change should be carried out by a qualified electrical engineer who can evaluate the site's electrical installation, the equipment loads and the operational requirements of the business. This assessment is essential to ensure that any change to the agreed capacity is appropriate and does not create operational risks.
Free Energy Help can assist with reviewing the commercial aspects of your electricity contract and identifying whether a capacity review may be worth exploring. However, any decision to change the agreed capacity must be made in consultation with a qualified electrical engineer and the distribution network operator. We do not provide electrical engineering advice and cannot guarantee that a capacity review will result in cost savings.
Free Energy Help does not provide electrical engineering advice and cannot guarantee that a capacity review will result in cost savings. Any decision to change agreed capacity must involve a qualified electrical engineer and the distribution network operator.
How Free Energy Help Supports Customers
Our team can assist businesses in understanding the capacity-related elements of their electricity contracts and in reviewing the capacity information associated with their supply points. We can identify the agreed supply capacity recorded against your MPAN and present this information clearly when obtaining quotations from our panel of commercial energy suppliers.
Where half-hourly consumption data is available, we can use it to identify the recorded maximum demand at a supply point and to assess whether the agreed capacity appears to be broadly appropriate for the demand profile. If the data suggests that a capacity review may be worth exploring, we will highlight this and recommend that you seek professional advice from a qualified electrical engineer and your distribution network operator.
For businesses with multi-site portfolios, we can assist in reviewing the capacity information across all supply points and in presenting this information clearly when obtaining contract quotations. Our role is to help you understand the commercial aspects of your electricity supply and to obtain competitive quotations from our broad panel of UK suppliers.
Frequently Asked Questions About Capacity Charges
Related Guides and Resources
Browse all our commercial energy guides in one place.
Read guideWhat kVA means, how maximum demand is measured and why capacity matters.
Read guideHow half-hourly metering works and why it matters for larger business supplies.
Read guideHow commercial electricity pricing is structured and what affects your contract rate.
Read guideRequest a free, no-obligation business energy quote from our specialist team.
Read guideNeed Help Reviewing Your Electricity Capacity Charges?
Our UK-based specialists can review the capacity-related elements of your electricity contract and obtain quotations from a broad panel of commercial energy suppliers — presenting the full cost breakdown clearly.