Business electricity capacity charges are levied by the Distribution Network Operator based on your Agreed Supply Capacity and appear as a distinct line on half-hourly settled bills. Exceeding your Maximum Import Capacity triggers excess charges at typically two to three times the standard rate. A formal capacity review with the DNO can reduce costs, but carries the risk of losing headroom for peak demand.
Last reviewed: 12 May 2026
What Capacity Charges Are and Why They Appear on Your Bill
Capacity charges are costs levied by the Distribution Network Operator (DNO) to recover the expense of maintaining electrical network infrastructure available to your premises, regardless of whether you use the full capacity in any given period. They appear on half-hourly settled business electricity bills as Distribution Use of System (DUoS) availability charges and are entirely separate from the unit rate charged for energy actually consumed.
The principle is analogous to a motorway toll that is charged for access to the road, not per mile driven. The DNO has invested capital to provide a cable, transformer, and switchgear capable of delivering your maximum agreed demand. Whether you draw that maximum or a fraction of it, the infrastructure must be there. The availability charge recovers the capital and maintenance cost of that provision.
For non-half-hourly (NHH) customers, capacity-related costs are bundled into the standing charge and unit rate by the supplier and are not separately visible. It is only on half-hourly (HH) metered sites that capacity charges appear as an itemised line, because HH settlement provides the granular demand data needed to apply the charge correctly.
Available Supply Capacity and Agreed Supply Capacity: The Key Terms
Two terms are used interchangeably in billing documentation and are a common source of confusion:
Available Supply Capacity (ASC): The maximum electrical demand, measured in kilovolt-amperes (kVA) or kilowatts (kW), that the DNO's network is designed to deliver to your premises. This is the physical capacity of the connection infrastructure.
Agreed Supply Capacity (ASC) or Maximum Import Capacity (MIC): The level of maximum demand that has been agreed between the DNO and the site owner or occupant, and that is used as the basis for billing. This figure is registered in the DNO's connection agreement and is the figure that appears on DUoS capacity charge calculations.
In most cases these two figures are the same or close. However, a business may have an MIC registered at a level set at the point of connection or a previous lease that is higher than its current operational requirement. This is one of the most common sources of capacity charge overpayment: businesses paying availability charges on capacity headroom they never use.
The MIC is expressed in kVA on most DNO billing schedules, though some use kW. Where the contract uses kVA, the relationship to kW depends on the site's power factor. A site with a power factor of 0.95 running at 100kW is drawing approximately 105kVA.
How DUoS Availability Charges Are Calculated
DUoS charges are set by each DNO through a charging methodology approved by Ofgem as part of the network price control process (currently RIIO-ED2 for electricity distribution, running 2023 to 2028). The charges are published in each DNO's Use of System charging statements, which are updated annually.
The availability charge is typically expressed as a monthly rate per kVA of MIC. A medium-sized commercial site with a registered MIC of 200kVA would pay the availability charge rate multiplied by 200 each month, regardless of whether peak demand reached 200kVA on any occasion during that period.
In addition to the availability charge, DUoS charges for HH sites include a unit rate component (pence per kWh) applied differently across three time bands: red (peak, weekday mornings and evenings), amber (shoulder periods), and green (off-peak nights and weekends). These time-banded unit charges are separate from the capacity availability charge but both flow from the DUoS structure.
Suppliers pass DUoS charges through to business customers either as itemised lines on pass-through contracts or bundled into the unit rate on fixed-price contracts. On a pass-through contract, a change in the DNO's published charges flows directly to the invoice. On a fixed contract, the supplier has already priced the estimated DUoS cost into the rate at the time of quoting.
Excess Capacity Charges: The Cost of Exceeding Your MIC
Where half-hourly data shows that actual demand in any 30-minute settlement period has exceeded the registered MIC, the DNO levies an excess capacity charge on that event. Excess capacity charges are materially higher than the standard availability rate, typically two to three times the monthly kVA rate applied on a per-kVA-exceeded basis for the relevant period.
Because excess charges are triggered by a single half-hour period of high demand, they can appear on a bill without the business being aware that demand briefly spiked above the agreed level. Common causes of unexpected excess demand events include:
- Simultaneous start-up of multiple large motors, HVAC compressors, or process equipment
- New equipment installed without an assessment of its demand contribution at peak
- Seasonal demand increases, such as electric heating in a cold snap, not anticipated at the time the MIC was set
- Metering errors where a data spike in the half-hourly record is the result of a meter fault rather than a genuine demand event
Where excess charges appear on a bill for the first time, obtain the half-hourly demand data from the supplier or data collector and identify the specific settlement periods that triggered the excess. If the spike corresponds to a known operational event, this confirms the MIC may need review. If no operational explanation exists, raise a metering query with the supplier.
Requesting a Capacity Review from the DNO
A formal capacity review is the process by which a business requests the DNO to reassess and potentially reduce the registered MIC. The request is made via the supplier, who raises a Distribution Connection and Use of System Agreement (DCUSA) modification with the DNO on the customer's behalf, or directly with the DNO's connections and metering team.
The DNO will review the half-hourly demand data for the site over a representative period, typically 12 months. Where actual maximum demand is consistently and materially below the registered MIC, a reduction may be agreed. The process typically takes 4 to 12 weeks depending on the DNO and the complexity of the connection.
The trade-off in reducing MIC: A lower MIC reduces the monthly availability charge. However, if demand subsequently exceeds the new lower MIC, excess charges apply at the punitive rate. A business considering a capacity reduction should model the saving against the probability of exceeding the new limit. Where demand is predictable and well below the current MIC, the case for reduction is strong. Where demand is variable or the business expects to grow, maintaining headroom may cost less than repeated excess charge events.
DNOs cannot refuse a capacity reduction without justification. The connection agreement is a commercial arrangement, and the customer has the right to request a review. However, a subsequent request to increase MIC above the reduced level will incur a new connection charge to fund the additional network capacity.
Reactive Power Charges and Power Factor
A related charge that appears on some HH-metered bills is a reactive power charge. Reactive power is the component of electrical current that does not perform useful work but that the network must still carry. It is measured in kVAr and arises from inductive loads such as motors, transformers, and fluorescent lighting without power factor correction.
DNOs levy reactive power charges where the site's power factor falls below a threshold, typically 0.95 lagging. The charge is intended to recover the additional network capacity that the reactive current component requires. Power factor correction capacitor banks, installed at the main distribution board, can eliminate or significantly reduce reactive power charges at a capital cost that typically pays back within 12 to 24 months on sites where the charge is material.
Frequently Asked Questions
Editorial disclaimer: The following answers address the most common queries about capacity charges on business electricity bills. They are provided for general guidance only. Specific DUoS charging rates, MIC levels, and DNO processes vary by region. Consult your supplier or the relevant DNO's published Use of System charging statements for rates applicable to your meter point.
Why do capacity charges appear even when we use very little electricity?
Capacity availability charges reflect the cost of having network capacity reserved for your premises, not the cost of energy consumed. Even if consumption is minimal in a billing period, the DNO has maintained the infrastructure capable of delivering your full MIC. The charge applies whether or not you draw on that capacity. This is why reviewing whether the registered MIC reflects actual operational needs is a material cost management exercise for businesses with lower consumption than their connection was originally designed for.
How do I find out what MIC is registered for my premises?
The registered MIC appears on your Distribution Connection and Use of System Agreement, which can be requested from your supplier or directly from the DNO for your area. It also appears in the half-hourly metering data record held by your Data Collector. If it is not shown on your invoice, ask your supplier to confirm the MIC figure and the DNO that serves your meter point.
Can I reduce my MIC quickly if excess charges are mounting?
A formal MIC reduction takes weeks to process through the DNO. In the meantime, the most effective short-term action is to implement demand management measures that prevent peak demand from recurring at the level that triggered the excess. This includes staggering equipment start-up times, scheduling high-draw processes outside peak periods, and investigating whether a specific piece of equipment is responsible for the demand spike.
Are capacity charges the same across all DNOs?
No. Each DNO sets its own DUoS charging schedule, approved by Ofgem under the RIIO-ED2 price control. Rates vary by network area and by voltage level. A business in the Western Power Distribution (now National Grid Electricity Distribution) area will pay different rates from one in the UK Power Networks area. Published charging schedules for each DNO are available on the relevant DNO's website and via Elexon's published data.
What is RIIO-ED2 and does it affect capacity charge levels?
RIIO-ED2 is Ofgem's current regulatory framework for electricity distribution networks, covering the period 2023 to 2028. It sets the revenue that DNOs are allowed to recover from customers through DUoS charges, including availability and unit charges. Changes in allowed revenue under the price control can result in increases or decreases to published DUoS charging rates at each annual review. Businesses on pass-through contracts see these changes flow directly to their bills. Those on fixed contracts are shielded until renewal.
How we verified this
This article draws on Ofgem's published RIIO-ED2 regulatory framework documentation, the Distribution Connection and Use of System Agreement (DCUSA) published by the DCUSA Management Limited, Elexon's settlement and metering documentation, and DNO-published Use of System charging statements. The legal basis for DUoS charging is verified against the Electricity Act 1989 and associated network licence conditions published by Ofgem.
Sources
- Ofgem RIIO-ED2 electricity distribution price control
- Elexon settlement and metering operations
- Ofgem Standard Licence Conditions
- Electricity Act 1989, legislation.gov.uk
For a full explanation of how capacity charges appear alongside other line items on a non-domestic electricity invoice, see business energy bill explained UK. For the specific context of half-hourly metering thresholds that determine whether capacity charges apply to your site, see half-hourly meter business UK.
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