To match electricity supply with demand on a national scale, it involves considerable challenges. A whole range of systems must be put in place to accurately and effectively ensure this is carried out on a continuing basis.
Maximum demand charges are just one of the tools that DNOs (distribution network operators) make use of for large business electricity customers.
In this guide, we hope to provide an in-depth explanation as to what maximum demand is and how it can have an impact on business electricity prices. Additionally, we will also go over a few steps on how to reduce the amount you pay for electricity.
To start with, we need to understand what maximum demand actually is. Maximum demand describes the peak power demand of any business from the National Grid during any 30-minute period. This only applies to businesses that are in profile classes 05 to 08.
If you’re unsure on which profile class your company falls into, look for the MPAN (Meter Point Administration Number) on your electricity bill. It will normally start with an ‘S’ and will be a 21-digit number that usually appears in a box with the heading of ‘Supply Number’. Look for the first two digits in the sequence of numbers next to the ‘S’. This will show you your profile class.
You will be a maximum demand customer if you are in profile 05, 06, 07 or 08. On this profile your energy meter will be able to measure peak demand over a specific period. A maximum demand charge can be found on your bill. It will highlight your firm’s peak demand of power from the National Grid over a set period of time. Normally, it will be shown as kilowatts (kW) or kilovolt-amperes (kVA).
Find out if your business is classed as a large energy user in our helpful guide.
Even if you don’t use this extra capacity, a maximum demand charge will still be added to your bill by the DNO regardless. Maximum demand refers to maximum import capacity (MIC). This is also commonly referred to as available supply capacity. This connection agreement outlines the upper limit of electricity that you expect to draw from the distribution system. You could face an excess capacity charge if your maximum demand surpasses the agreed maximum import capacity.
All maximum demand customers have been transitioned over to half hourly meters since April 2017. This will help to build a smarter electricity network within the UK that enables the balancing of power supply and demand in a far more efficient manner.
A change in the Balancing and Settlement Code, known as P272, meant that the switch to half hourly meters was applied. With half hourly settlements in place, a large number of businesses will not see a difference in their bills, others will pay a reduced amount. Nonetheless, some firms will be required to pay extra. Anyone with a current transformer (CT) meter may be expected to pay an increased amount for their commercial electricity. This is due to the DNO applying charges for the reserved network capacity.
Meters record usage data every 30 minutes for half hourly sites, instead of waiting for a meter reading to be taken. What this means is that providers can now charge based on actual usage rather than estimations, which in the past have been known to be unreliable.
With P272, a supplier will automatically receive your usage data to enable them to calculate your costs more accurately and efficiently, for profile classes 05 to 08 on half hourly meters. Your actual electricity consumption will be reflected within this data. In addition to being useful information for both the supplier and the DNO, it also allows your business to monitor power usage more closely. Furthermore, you will be able to procure energy as a large business more efficiently and better understand your energy expenditure.
A maximum demand half hourly meter works just like any regular energy meter – both record your electricity usage. However, there is one key difference: a maximum demand meter, through telecommunication, sends readings back to the supplier every 30 minutes. It is also worth noting that the meter simply forwards the data for analysis and storage, the maximum demand calculation does not actually take place within the meter itself.
Demand charges, sometimes referred to as availability charges or capacity charges, are charges set by the DNO. The figures will be based upon the agreed capacity for your site and will be added on to your bill.
Your business’ authorised service capacity, or availability, is the amount of energy reserved from the network that guarantees a designed volume of electricity to your half hourly supply. This designed capacity is available for any premises that has a half hourly meter.This charge isn’t the same as how much you consume, it actually relates to the maximum demand. Capacity charges range between £0.70 to £1.50 per kVA and are determined by where you are located within the UK. These availability or capacity charges are applied on a monthly basis, and do not factor in how much electricity your company makes use of. Higher demand charges may mean you end up paying more than actually required. Not only this, charges can also be remarkable, making it advisable to keep an eye on them.
Here’s a quick example: a site with 500 kVA with a charge of £1 per kVA will need to pay £500 per month in capacity charges alone, regardless of how much power is being used. Paying more than what is deemed necessary can really cost your business huge sums of money over time for these capacity or availability charges.
It will be a top priority for any business to find ways to reduce their costs, especially business energy expenditure. To start with, ensure your MIC charges reflect your peak power demand.
As a maximum demand customer, your business electricity bill will include a whole range of charges such as the unit charge per kWh and a capacity charge. Having a high MIC may mean that your bills are more expensive than they need to be.
Should this be the case, get in touch with your DNO to look into this for you. Beforehand, remember to carry out a review of your maximum demand in order to establish whether the MIC charge is too high. It’s also highly recommended that you carry out a business energy audit too, this can help you improve energy efficiency which will in turn equate to lower payments towards your bills.
Aside from fully understanding maximum demand meter charges, and taking the necessary steps to decrease them, you can also lower your overall costs by switching to a new supplier. With a range of options available to you, it is fairly easy to find a competitive deal through Utility Saving Expert’s online business energy comparison tools.
Furthermore, a time of use tariff may be a suitable option for your business. This plan allows you to pay less for using electricity outside of peak hours. Depending on your business’ energy requirements and operating hours, a time of use tariff could potentially save you an enormous amount of money and is definitely worth looking into. Find out more about business energy tariffs in our useful guide where we explain the benefits and drawbacks of each option, as well as what you must avoid.
To conclude, a maximum demand charge is used by a DNO and describes the peak power demand of any business from the National Grid during a 30-minute period.
A maximum demand meter works just like any other energy meter – both record your electricity consumption. However, a maximum demand meter will send back readings to the energy supplier every 30 minutes. The data is then analysed and stored; the maximum demand calculation does not actually take place within the meter itself.