Somewhere on your electricity bill, there's a charge you're probably not paying attention to. It's not the unit rate. It's not the standing charge. It's your capacity charge — and if it's wrong, it could be costing you thousands.
What is a capacity charge?
A capacity charge — sometimes called an availability charge or Agreed Supply Capacity (ASC) — is a fee for the maximum amount of electricity your site is authorised to draw from the grid at any point. Think of it as a reservation fee. You're paying for a certain amount of electrical capacity to be available to you, whether you use it or not.
Your Agreed Supply Capacity is measured in kVA (kilovolt-amperes) and is set when your electricity supply is first connected or when your business takes over the premises. It's supposed to reflect the maximum demand your site is likely to need.
The key point: You pay for the capacity you've reserved, not the capacity you actually use. If your ASC is set too high, you're overpaying. If it's set too low, you might face excess capacity charges when you go over.
How are capacity charges calculated?
The calculation has two components:
DUoS capacity charge: Your DNO (Distribution Network Operator) charges a daily or monthly rate per kVA of agreed capacity. This rate varies by region and voltage level. A typical rate might be 1-3p per kVA per day.
For a business with 150 kVA ASC at 2p per kVA per day, the annual DUoS capacity charge is: 150 x 0.02 x 365 = £1,095 per year.
Excess capacity charges: If your maximum demand exceeds your ASC in any half-hour period, the DNO charges a penalty rate for the excess. These penalty rates are significantly higher than the standard capacity rate — often 2-3 times the normal charge per kVA.
Some suppliers also include a capacity-related component in their own charges, separate from the DNO pass-through. This should be set out in your contract.
Common capacity charge errors
ASC set too high from the start
This is the most common issue and it's not technically an error — it's a default that nobody reviewed. When a new supply is connected, the ASC is set based on the expected maximum demand. But many businesses never actually need the full capacity that was originally specified.
A restaurant with 200 kVA ASC that only ever draws 80 kVA at peak is paying for 120 kVA of capacity it doesn't need. At 2p per kVA per day, that's £876 per year in unnecessary charges.
ASC not reduced after business changes
If your business has downsized, changed operating hours, or replaced old equipment with more efficient alternatives, your maximum demand may have dropped. But your ASC doesn't adjust automatically. Someone has to request a reduction from the DNO.
Wrong capacity tariff applied
DNOs have different capacity tariff bands depending on your voltage level and connection type. If the wrong tariff band is applied to your meter, the per-kVA rate will be wrong.
Excess charges that shouldn't have been charged
Excess capacity charges should only apply when your actual maximum demand — as measured by your half-hourly meter — exceeds your ASC. If you're being charged excess capacity but your meter data shows you never exceeded your ASC, the charge is wrong.
ASC increased without authorisation
In some cases, a DNO may increase your ASC following network work or meter changes, and the higher capacity charge gets applied without the customer being informed or consenting to the increase.
How to check your capacity charges
1. Find your Agreed Supply Capacity. This should be stated on your bill, your connection agreement, or available from your DNO. If you can't find it, your supplier or broker can request it.
2. Compare ASC to your actual maximum demand. If you have a half-hourly meter, you can access your maximum demand data through your supplier, your meter operator, or a data collector. Compare your highest recorded demand (in kVA) over the past 12 months against your ASC.
If your maximum demand is consistently well below your ASC — say, 60% or less — you're likely overpaying for capacity you don't need.
3. Check the per-kVA rate. Compare the capacity rate on your bill against the published DNO tariff for your region, voltage level, and connection type. The tariffs are published annually on your DNO's website (UK Power Networks, Western Power Distribution, Northern Powergrid, etc.).
4. Review excess capacity charges. If you've been charged for exceeding your ASC, check your half-hourly meter data for the billing period in question. Verify that your maximum demand actually exceeded your ASC during at least one half-hour period.
5. Check the billing calculation. Multiply your ASC by the daily rate by the number of days in the billing period. The result should match the capacity charge on your bill. If it doesn't, the supplier's system has made a calculation error.
How to reduce your capacity charge
If your ASC is too high, you can request a reduction from your DNO. The process:
- Contact your DNO (not your supplier — the DNO owns the connection)
- Request a reduction in your Agreed Supply Capacity
- The DNO will assess whether the reduction is feasible based on network constraints
- If approved, your new lower ASC takes effect and your capacity charges reduce accordingly
Some DNOs process this quickly. Others take weeks. And there may be a charge for the assessment, though it's usually modest compared to the ongoing savings.
Important: Don't reduce your ASC below what you actually need. If your maximum demand exceeds a reduced ASC, the excess capacity charges will cost more than the savings. Get your maximum demand data first and set the new ASC with appropriate headroom.
Why this matters for brokers
Capacity charges are an area where brokers can add genuine value between renewals. A quick review of ASC versus actual maximum demand across a portfolio can uncover savings that have nothing to do with switching supplier or negotiating unit rates.
It's also a retention tool. A broker who identifies a £1,000 per year saving on capacity charges — without changing anything about the client's contract or supplier — is a broker worth keeping.
For the full picture on what else to check on energy bills, see our guide to common energy billing errors in the UK. And if you want to audit network charges more broadly, how to audit DUoS and TNUoS charges goes deeper on the distribution and transmission components.
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