Tom Melhuish 7 min read

Maximum demand charges and meters

Regional grid operators in Britain must continuously balance supply and demand to ensure there is always sufficient electricity to meet the needs of all homes and businesses in the area.

To help manage real-time demand, grid operators use maximum demand meters and charges for properties that consume large amounts of electricity.

This guide explains maximum demand meters and charges for British businesses. We begin by outlining the key concepts of maximum demand and import capacity.

What is maximum demand?

Maximum demand refers to the peak amount of electricity drawn from an individual business energy connection.

Maximum demand meters record the electricity a business consumes every 30 minutes and automatically transmit this data to suppliers and grid operators.

Maximum demand is the single 30-minute period in which the business consumes the most power during a month-long billing period.

What is Maximum Import Capacity?

Maximum Import Capacity (MIC) is the maximum demand a grid operator agrees to always make available to an individual business electricity connection.

Properties with a higher demand for power will have a higher Maximum Import Capacity agreed with the regional grid operator.

Here’s an example of the Maximum Import Capacity for different connections:

Average British home – 8 kVA
Small shop – 20 kVA
Medium-sized supermarket – 100 kVA
Medium-sized factory – 300 kVA

*kVA is a measure of apparent power: it tells you the total power used in a system. In a 100% efficient system, kW = kVA. However, electrical systems are never 100% efficient, so not all of the system’s apparent power is used for useful work output. Ref: https://powerelectrics.com/blog/the-difference-between-kw-and-kva

How maximum demand charges work

There are two types of charges related to the maximum demand of a business: capacity charges and excess capacity charges.

We’ll explain both below, including an example of how they are calculated.

Capacity charges

Capacity charges are a type of business energy standing charge paid by commercial properties to guarantee the Maximum Import Capacity of an individual connection. The larger the capacity of your connection, the higher the monthly capacity charge.

Capacity charges are paid for each kVA of Maximum Import Capacity on a business electricity connection for properties with a Maximum Import Capacity of 100 kVA or more.

Capacity charges typically range between 2–4 pence per kVA per day. Here’s an example of how they are calculated for a commercial property with a 200 kVA connection:

Monthly capacity charge = 200 kVA × £0.03/kVA/day × 30 days = £180

Excess capacity charges

Excess capacity charges are an additional charge that applies only when the measured maximum demand of an individual connection exceeds the Maximum Import Capacity.

These charges are, on average, 73% higher than typical capacity charges.

Here’s an example of how an excess demand charge is calculated for the same property above, which has a 200 kVA Maximum Import Capacity but recorded an actual maximum demand of 230 kVA:

Excess capacity: 230 kVA – 200 kVA = 30 kVA
Excess capacity charge per kVA: 5p/kVA/day
Excess demand charge: 30 kVA × £0.05/kVA/day × 30 days = £45

The excess capacity charge is applied for the entire month in which the Maximum Import Capacity was exceeded.

Do you need a Maximum Import Capacity review?

It is possible to change the Maximum Import Capacity of a connection by contacting your Distribution Network Operator.

It is important to assess whether the Maximum Import Capacity of your connection is appropriate because:

If the Maximum Import Capacity is too high – Your business will be paying unnecessarily high monthly capacity charges.
If the Maximum Import Capacity is too low – Your business will incur expensive excess capacity charges that could be avoided, and the connection may not meet the peak power requirements of your business.

We recommend conducting a Maximum Import Capacity review if you have recently moved into a property with a maximum demand meter or if the way your business uses electricity has changed.

What is a maximum demand meter?

A maximum demand meter is a type of business energy meter that automatically records electricity usage every 30 minutes to measure maximum demand.

Business energy suppliers install maximum demand meters at the properties of large business energy customers to calculate demand and excess demand charges on monthly business energy bills.

How does a maximum demand meter work?

A maximum demand meter functions similarly to other types of smart energy meters by measuring the electrical energy passing through it and recording the total kWh consumed since installation.

A maximum demand meter records and transmits automatic meter readings every 30 minutes to the relevant energy supplier.

The energy supplier uses this data to identify the single 30-minute period of maximum demand for each individual customer.

Maximum demand meters for businesses with an electricity connection with a capacity of over 100 kVA are known as half-hourly meters. Find out more in our full guide to understanding half-hourly meters.

Modern smart business energy meters can also function as maximum demand meters and will begin performing this role as part of the Market-wide Half-Hourly Settlement (MHHS) programme being developed by Ofgem.

How do I know if I’m on a maximum demand meter?

There are a few ways to check if you are on a maximum demand meter:

Check your electricity bill – If you are on a maximum demand meter, it should be clearly stated on your electricity bill. Look for references to “MD” or “maximum demand” charges.
Contact your business energy supplier – You can also contact your energy supplier and ask them if you are on a maximum demand meter. They can provide information about your meter type and its associated charges.
Check your MPAN – Your MPAN (Meter Point Administration Number) is a 21-digit number that usually appears in a box on your bill under the heading ‘Supply Number’. Maximum demand customer have an MPAN that starts with 00, 05, 06, 07, or 08.

It is worth noting that larger commercial and industrial energy users typically use maximum demand meters. So, if you are a residential customer or a small business energy customer, you are less likely to be on this type of meter.

Do I need a maximum demand meter for my business?

Maximum demand meters are typically required for larger businesses with high energy consumption or a half-hourly metering obligation.

Under energy regulation P272, any business with a Maximum Import Capacity of 100 kVA or greater must have a maximum demand meter.

How do I reduce my maximum demand charges?

Here are six tips for reducing maximum demand charges on your business electricity prices:

Improve your energy efficiency

Enhancing energy efficiency can help lower energy consumption and reduce maximum demand charges. Consider upgrading old equipment to newer, more energy-efficient models or implementing business energy-efficiency measures such as LED lighting or motion sensors.

Power factor correction

Power factor correction improves the efficiency of electrical systems by reducing the amount of reactive power drawn from the grid. This can be achieved by installing capacitors or optimising the design of electrical systems.

Load management

Load management involves shifting electricity usage to off-peak hours to reduce peak demand. This can be achieved using commercial solar batteries and an energy management system to store cheap off-peak electricity, which can then be used as an alternative during periods of maximum demand.

Avoiding peak time

Avoiding high-demand periods altogether can help reduce maximum demand charges. This can be achieved by scheduling energy-intensive activities, such as data backups to on-site servers, during off-peak hours.

Renewable energy

Generating your own renewable business energy by installing commercial solar panels can reduce reliance on grid electricity and lower maximum demand charges.

Compare prices

All energy suppliers add a margin on top of their capacity charges, so cheaper charges can often be found by comparing the quotes offered by different suppliers.

Use our business energy comparison service today to determine how much you can save.

Can I switch energy suppliers if I have a maximum demand meter?

Yes, you can switch business energy suppliers with a maximum demand meter.

The process of obtaining a quote for a maximum demand customer takes a little longer, as the supplier will need to analyse historical consumption data from the maximum demand meter.

It’s important to carefully compare business energy tariffs and seek advice from a reputable business energy broker or advisor before switching.