DCP161 is an energy policy change that affects excess capacity charges for half-hourly commercial energy customers.
What is DCP161?
DCP161 is an amendment to the energy policies that govern the UK energy supply which removes the discounts applied to excess capacity charges. Some customers who make contributions to reinforcement works at the point of connection are given a discount in return for their contribution.
Discounts are applied to both the standard capacity charges and excess capacity charges that are paid to the Distribution Network Operators (DNOs) through the energy bills. The excess capacity charge is a charge for exceeding their contracted capacity level.
This amendment was proposed by Electricity North West as the discount mechanism that was operating could in some circumstances act as an incentive when it was not designed to be.
DCP161 came into effect from 1 April 2018 and was introduced by Ofgem to prevent half-hourly customers from receiving discounts on the charges made when they exceed their capacity limit and to allow these charges to be significantly higher to reflect the costs occurred.
This has resulted in the amendment of the Distribution Connection and Use of System Agreement which is where the discount and charges were detailed.
Why is DCP161 Necessary?
The Distribution Network Operators (DNOs) can often incur additional charges when their customers exceed their contracted capacity levels and this amendment enables them to recover these charges through the excess capacity charges.
This DCP161 change will make energy bills higher, but they will better reflect the cost incurred by the DNO.
It also acts as an incentive to businesses to not exceed the contracted capacity levels as the increase in these charges acts as a deterrent and penalises them. Previously, there was no deterrent or penalty other than the standard charges for the additional capacity rate.
How Will This Impact Customers?
Customers who previously have benefitted from the discounts to the excess capacity charge will see their energy bills increase as the discount is removed.
All half-hourly customers will be impacted by the increased charges from the DNOs if they exceed their capacity levels as they are able to more accurately reflect the charges they incur. The rates charged for excess capacity previously were the same standard rates as the capacity charges.
To avoid or reduce the impact of this change half-hourly customers should manage their energy consumption and their contracted capacity levels better.
Minimising the Effect of DCP161
Customers impacted by DCP161 should assess their energy consumption needs and anticipate what level of energy they will be requiring to accurately agree to capacity levels with their supplier. This will then reduce the risk of being penalised with excess capacity charges as the business is less like to exceed the capacity level agreed.
Businesses can also reduce the effect further by making energy efficiency improvements to their premises and business processes that would reduce their energy consumption.
Any customers that are switching from non-half hourly meters to half-hourly meters may not understand the impact or what level they should set their capacity levels at. Customers in these circumstances should seek advice to assist them in setting the correct capacity levels to avoid excess capacity charges.
Businesses impacted should also negotiate the capacity charges when their energy supply or capacity contracts are up for renewal to ensure that they select the best supplier and deal for their circumstances.