Sponsored: James Pearson, head of I&C pricing, British Gas Business, outlines changes to network capacity charges coming into effect from April – and the actions businesses should take in preparation.
From April 2018, sites that exceed their allocated electrical capacity could be facing significant increases on their electricity bill. Approved by Ofgem in October 2014, Distribution Change Proposal (DCP) 161 introduces new charges for half-hourly metered sites that use more capacity than they have been allocated under their connection agreement.
These sites are allocated a maximum import capacity (MIC). This is the level which that site can pull from the grid at any given time. This is usually listed on the electricity invoice as ‘Capacity Charge’ and is charged in pence per kVA, per day.
Sites that frequently require more capacity than has been agreed with the network operator are putting strain on the system. Currently, excess usage is charged as the same rate as agreed capacity. It is indicated on the bill that an excess charge has been applied, but because there are no punitive charges, there is no incentive to stay below the threshold.
DCP 161 will introduce exceedance charges so those that go over their agreed capacity will be charged at a higher rate. So what we can do about it?
Firstly, check your demand profile or look over some recent invoices to make sure you are not already being charged for excess capacity use. Businesses are especially advised to look at sites which have only recently become half-hourly settled through the P272 process, to ensure the available capacity was set at a suitable level.
If all sites in your portfolio are comfortably below the agreed capacity limit, then relax!
If however, your demand occasionally peaks above the allocated site capacity then we need to get strategic. To avoid these significant excess charges, there are two options:
1. Reduce consumption to bring it below the agreed threshold.
2. If you cannot cut consumption, then you need to apply to the DNO for an increase in agreed capacity. There may be a fee associated with this, particularly in regions where the network is already very constrained.
If the capacity exceedance happens regularly at times of peak consumption, the best approach may be to engage in demand management or invest in on-site generation. This could also unlock new revenue streams through accessing services such as the capacity market – an area where Centrica Business Solutions has proven expertise in powering cost reduction and revenue generation ambitions for hundreds of private and public sector organisations.
If the exceedance is a more consistent breach, increasing the MIC may be more appropriate. Alternatively this could be a good opportunity to focus on overall energy reduction.
Luckily, our expert energy teams at British Gas Business are ideally placed to help customers decide. It’s all part of our “Buy Better, Use Wisely, Low Carbon Generation” Philosophy.
Find out how British Gas Business can help you save money on 0845 070 3720.
For more information on managing your business’ energy, visit britishgas.co.uk/large-business