On April 1, 2018, DCP 161 came into force; introduced by Ofgem to ensure that half hourly supplies that exceed their assigned available capacity pay significantly more, it will affect all kinds of businesses, including schools, academies and other educational institutes
Amar Hussain, managing director at Kinect Energy, explains just what DCP 161 is and what school business managers need to be aware of
What is DCP 161?
Introduced by Ofgem from April 1, DCP 161 is a new measure which aims to ensure that half hourly (HH) supplies that exceed their assigned available capacity pay significantly more. According to STC Energy Consultants, in a change to the distribution connection use of system agreement – or DCUSA – it introduces excess capacity penalties for half hourly electricity supplies and will ensure that the additional costs the distribution network operators (DNOs) may incur when customers exceed their available capacity levels are recovered.
So, what does this mean for organisations that consume a high volume of energy? We asked Amar Hussain, managing director at Kinect Energy, to explain.
Heavy energy users – act now
The changes are intended as a means of recuperating costs incurred by DNOs when customers exceed their available capacity levels, and represent a significant shift from current rules. Currently, any business that exceeds its allocated capacity is charged for usage at the usual rate but, from now on, heavy energy users who do not increase their capacities in accordance with the new measures could face hefty financial penalties.
The excess penalty rate will be as much as three times the standard rate and costs will be higher in areas where demand for capacity is high. It is crucial that businesses and organisations, across all sectors, which haven’t already made changes understand the implications of Ofgem’s new measures.
DCP 161 will affect all kinds of businesses, including schools, academies and other educational institutes – and especially those which use a half-hourly meter; most newer-build schools will have these.
When you have a half-hourly meter you’re allocated an available supply capacity on the basis of what you have requested from your DNO. These requests are usually made by someone within your organisation who has knowledge of what’s required.
The simplest way to describe this is that it’s like an overdraft on your bank account; you may ask for a £100 overdraft and be granted it, but you’ll be charged for that facility and, if you go over it, there will be further charges. A half-hourly meter works in the same way and, in my opinion, it is those schools and academies with half-hourly meters, or who are about to switch to them, which could be hit hardest by the changes.
If you do not know what your available capacity is to begin with then you should seek advice and find out what the agreed capacity is as soon as possible. You then need to establish whether it’s enough.
Before April 1, if you went over your available supply capacity, then you’d be charged the equivalent of what you were paying for the assigned supply; so, if you paid £1 per unit, they’d still charge you £1 for every unit that you went over by. However, after April 1, if you exceed the agreed capacity, the extra cost will be far greater.
This is likely to vary from region to region, and depend on the DNO, but it could be around 70% higher in some instances, or even double the standard price. Those that are already on the HH meters – who know their capacity and their usage – need to be actively monitoring and assessing, but it’s those who are in the process of switching, or moving to a new site, who could be hit hardest.
To reiterate, any organisation that hasn’t established its available supply capacity could be vulnerable. My advice is to seek guidance from an energy consultant who can analyse historic usage and make recommendations based on that. A consultant can look at changes in usage, why it’s changed, and suggest adjustments to the assigned available capacity reflecting these factors.