Business Energy Glossary
What is a capacity charge?
A capacity charge is a daily fee per kVA of Authorised Supply Capacity, levied on half-hourly metered UK electricity sites. The charge applies whether or not the capacity is used. It funds the share of network costs allocated to keeping the supply sized to meet the customer maximum demand. On larger commercial supplies the capacity charge can run to several hundred pounds a month.
Capacity charges only apply on half-hourly metered electricity supplies. Smaller non-half-hourly sites pay a flat standing charge instead. The distinction matters because the capacity charge is sensitive to a single number (the kVA ASC) that often goes unreviewed for years and frequently turns out to be much higher than the site actually needs.
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How the capacity charge works
The capacity charge is part of the DUoS recovery mechanism for half-hourly sites. The DNO needs to size its network to handle each customer maximum demand, and the cost of doing so is recovered through the capacity charge. The mechanics:
- Every HH site has an Authorised Supply Capacity (ASC) measured in kVA, set by the DNO.
- The capacity charge is a daily pence-per-kVA rate, multiplied by the ASC and the number of days in the billing period.
- The charge applies regardless of actual usage. A site that uses 10 per cent of its ASC pays the same capacity charge as a site using 100 per cent.
How it is calculated
The basic formula:
Monthly capacity charge = ASC (kVA) × capacity rate (p/kVA/day) × days in the month
A site with an ASC of 200 kVA, at a capacity rate of 6 p/kVA per day, in a 30-day month:
200 × 6 × 30 = 36,000 pence = £360 for the month
The capacity rate varies by DNO region, voltage level, and (in some cases) time of year. The rates are published annually by each DNO and approved by Ofgem.
The Authorised Supply Capacity
The ASC is the maximum apparent power, in kVA, that the supply is permitted to draw. It is set when the supply is first energised and rarely revisited unless the customer or supplier requests a change.
Typical ASC ranges:
| Site type | Typical ASC |
|---|---|
| Small HH metered office or shop | 50 to 100 kVA |
| Mid-sized hotel, restaurant, or care home | 100 to 250 kVA |
| Larger production unit or supermarket | 250 to 500 kVA |
| Heavy industrial | 500 kVA and up |
The ASC the customer needs is the maximum half-hourly demand over a typical year plus a sensible buffer (10 to 15 per cent) for growth and seasonal variation.
Excess capacity charges
If the customer half-hourly demand exceeds the ASC in any single 30-minute period during a month, the supply has gone into excess. The DNO charges for excess capacity at a higher rate, typically 2 to 3 times the standard capacity rate, applied to the excess kVA in that period.
Excess charges accumulate quickly on sites that have outgrown their ASC. A common scenario: a site has added new equipment or extended operating hours without reviewing the ASC. Each month, the capacity is breached and excess charges appear on the bill.
The customer remedy is to apply through the supplier for an ASC increase. The DNO confirms whether the upstream network can support the higher capacity. Where it can, the change is administrative.
How to reduce the capacity charge
The primary lever is right-sizing the ASC. The process:
- Pull 12 to 24 months of half-hourly consumption data from the supplier.
- Find the maximum half-hourly kVA demand across the period (or convert from kW using site power factor).
- Add a 10 to 15 per cent buffer for growth and seasonality.
- Compare against the current ASC. If the buffer-adjusted peak is materially below the current ASC, request a reduction through the supplier.
- The DNO usually processes the change within 4 to 6 weeks.
A small DNO administrative fee applies for the change, usually recovered within the first month of lower capacity charges. The reduction remains in effect until the customer requests another change.
A secondary lever is power factor correction. Sites with poor power factor (below 0.9) draw more kVA for the same kW of useful work. Installing capacitor banks improves power factor and reduces the kVA draw, potentially allowing a further ASC reduction.
Capacity charge under the TCR
The Targeted Charging Review (TCR), implemented in April 2022, changed how some elements of network recovery are allocated. The capacity charge as a daily kVA-based fee remains in place for HH sites, but a portion of network cost recovery moved to a fixed daily charge banded by site size.
The net effect for most HH sites was a reduction in the per-kVA capacity rate but the introduction of a higher fixed element. The lever of reducing ASC remains valid but the savings per kVA are slightly smaller than before TCR.
a capacity charge FAQs
What is a capacity charge?
A daily fee per kVA of Authorised Supply Capacity (ASC) levied on half-hourly metered UK electricity sites. It applies whether or not the capacity is used.
How is the capacity charge calculated?
ASC in kVA multiplied by the capacity rate in p/kVA per day, multiplied by the number of days in the billing period.
Do small sites pay capacity charges?
No. Capacity charges only apply on half-hourly metered electricity supplies. Smaller non-half-hourly sites pay a flat standing charge instead.
What is an excess capacity charge?
A higher rate applied to any kVA used above the Authorised Supply Capacity in any half-hour period. Typically 2 to 3 times the standard capacity rate.
How do I reduce my capacity charge?
Review actual half-hourly demand against the ASC. If the peak demand over a year is materially below the ASC, apply through the supplier for a reduction. The DNO usually processes the change within 4 to 6 weeks.
Can the capacity charge change during a contract?
On a fixed contract, the rate is set for the term. On a pass-through contract, the per-kVA capacity rate can change at each DNO annual price review.
What is the difference between capacity charge and standing charge?
Standing charge is a flat daily fee on every electricity supply. Capacity charge is an additional daily fee per kVA of ASC, applied only to half-hourly metered sites.
Did the Targeted Charging Review affect capacity charges?
Yes. From April 2022, a portion of network recovery moved to a fixed daily charge banded by site size. The per-kVA capacity rate was reduced but a new fixed element was added. The total recovery is broadly similar; the allocation is more even across customers.