Matching electricity supply with demand on a national level is a delicate balancing act, and there are various systems in place to help ensure this is done accurately and effectively on an ongoing basis. One of the tools used to help with this is the imposition of ‘maximum demand’ charges by distribution network operators (DNOs) on big electricity consumers.
Here, we explain what maximum demand refers to, and how it may affect your business’ electricity costs. We also offer tips on how to minimise the amount you pay for electricity.
What is maximum demand?
Maximum demand is the term used to describe your peak power demand from the grid over any half-hour period. It only applies to your business if you are in profile classes 05-08. If you are not sure which profile class your company falls into, check the Meter Point Administration Number on your electricity bill. This is a 21-digit number (usually starting with an ‘S’) that is displayed in a grid format and typically appears in a box titled ‘Supply Number’. The first two-digit number in the box immediately to the right of the ‘S’ will show your profile class.
What is maximum demand?
If you are in profile classes 05, 06, 07 or 08, you are referred to as a maximum demand customer and your meter will be able to measure peak demand over a given period. You may have seen a ‘maximum demand’ charge on your bill. This represents your peak demand of power from the grid over a set period of time, and it’s expressed in kilowatts (kW) or kilovolt-amperes (kVA).
Your DNO will add a maximum demand charge to your bill regardless of whether you use this capacity or not. Maximum demand is related to maximum import capacity (MIC). Also known as available supply capacity, this is a connection agreement that you have with your DNO which specifies the upper threshold of electricity that you expect to draw from the distribution system. If your maximum demand exceeds the agreed MIC, you will face an excess capacity charge.
What’s a maximum demand meter?
Since April 2017, all non-domestic maximum demand customers have been moved to half hourly meters. This is part of an ongoing effort in the UK to create a smarter electricity network that allows for the more effective balancing of power supply and demand.
The transfer to half hourly meters was implemented due to a change in the Balancing and Settlement Code called P272. Under half hourly settlements, many businesses have seen either no change to their bills or a reduction in the amount they pay. However, some companies have been required to pay more. Those businesses with a current transformer (CT) meter may be among those that have experienced a rise in their electricity charges. This is because they now face charges for the capacity their DNO has reserved on their network. For half hourly sites, meters record consumption data every 30 minutes, rather than waiting for meter readings to be taken. This allows suppliers to settle consumption based on actual usage.
How does a maximum demand meter work?
Following P272, your profile class 05-08 half hourly meter will automatically send consumption data to your supplier to facilitate a more accurate and efficient settlement. This data reflects your actual consumption of electricity. As well as being useful for suppliers and DNOs, it can help your business to monitor power usage more closely, buy electricity more efficiently and better understand your costs.
Maximum demand, half hourly meters work in the same way as regular meters in that they record electricity consumption. The main difference is that maximum demand meter readings are automatically transmitted to power suppliers every 30 minutes via telecommunication. However, the maximum demand calculation doesn’t occur in the energy meter itself – the meter simply passes information on for storage and analysis.
Demand charges explained
Demand charges, also called capacity charges or availability charges, are the charges imposed by your DNO based on your business’ agreed capacity for your site. They are added to your energy bill. Your authorised service capacity, or availability, is the amount of power reserved from the network that guarantees a designated volume of electricity to your half hourly supply. All business premises with a half hourly meter have this designated capacity.
The charge is different to your consumption. As mentioned previously, it relates to your maximum demand instead. Capacity charges in the UK differ according to location and can range from around 70p to £1.50 per kVA. Your capacity or availability charges are applied each month, regardless of how much electricity you use. If your demand charges are set too high, you will end up paying more than you need to. These charges can be significant too, so it is important to watch out for this potential problem. For example, a site with 400 kVA with a charge of £1 per kVA would be required to pay £400 a month in capacity charges, no matter how much power they used. Over time, paying more than necessary in the form of capacity or availability charges can cost your business large sums.
How can I lower my electricity bills?
Keeping energy costs to a minimum is likely to be a priority for your business. Here are just some of the ways you can do this. Make sure your MIC charge reflects your peak power demand
If you are a maximum demand customer, your business electricity bill will comprise a range of charges, including a unit charge per kWh of electricity used and a capacity charge. If your MIC is too high, your bills will be more expensive than necessary. If you think this is the case, you can contact your DNO to address the issue. You may need to carry out a review of your maximum demand in order to establish whether your MIC charge is too high.
Switch to a new supplier
As well as making sure you understand any charges related to maximum demand and, if necessary, taking steps to reduce them, there are a range of other things you can do to lower your business energy costs. For example, you may benefit from switching electricity suppliers. There are many suppliers operating in the UK, so there is no shortage of options. Deals can vary significantly between these companies and it’s important to shop around. Don’t be shy about asking your existing supplier for the best possible deal, and you may wish to get in touch with other suppliers to see if they can offer you a better deal.
Because this process takes time and effort, many businesses choose to use the services of an energy comparison and switching specialist. At Utility Bidder, we can scour the market on your behalf and take care of the switching process for you so that you can continue focussing on other essential business tasks.
Consider moving to a time-of-use tariff
One type of tariff that may suit the needs of your organisation is a time-of-use contract. These deals allow you to pay less for using electricity outside of peak hours. Depending on your business’ energy requirements, these tariffs could save you a considerable sum, so they are well worth investigating.
Find ways to lower your energy usage
Reducing your consumption of energy is another effective way to bring your bills down. There may be some fairly straightforward steps that your company can take to lower your electricity usage. For example, switching from traditional light bulbs to light emitting diodes (LEDs) or compact fluorescent lamps (CLFs) could help you to save substantial sums over the long term. It might also benefit your bottom line to encourage your employees to get into the habit of switching electronics off when they are not being used, rather than leaving them on standby mode. Think carefully about how you use your heating and air conditioning systems too. For example, by closing window blinds in your office on hot, sunny days, you may be able to turn your air conditioning down. In contrast, during winter, allowing sunlight to stream into your office can raise the temperature and mean you are less reliant on your heating.
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