What Do Airline Baggage Allowances and DCP 161 Have in Common?


As we enter the annual holiday season, we might view DCP 161 in the same manner an airline views and charges passengers for excess baggage.

We all know what that means to our wallet, if we don’t consider our baggage allowance before travelling. DCP 161 is an approved modification by Ofgem to the Distribution Connection and Use of System Agreement (DCUSA). From 1st April 2018, DCP 161 will come into force. It has been put in place to ensure that half hourly (HH) supplies which exceed their allocated available capacity pay substantially more for doing so. The purpose of establishing these excess capacity penalties for HH supplies, is to ensure that the additional costs that DNOs (Distribution Network Operators) can incur, when customers exceed their available capacity, are recovered. At present and up until 1st April next year, if a HH supply point exceeds its available capacity, the electricity supplier invoices excess kVA at the standard available capacity rate, with no measures to penalise the energy user. With little or no financial motivation for energy users to consider capacity requirements, significant pressure has been placed on distribution networks and the operators. So DCP 161 is to be introduced to ensure users take greater responsibility for network use and either reduce demand, or pay for it. Importantly, because there will also be a finite total allocated capacity on networks, any future projects requiring additional capacity beyond which is available and allocated to a user, will have to be paid for at significant cost. Therefore, if you are planning for such eventualities you will need to consider greater cost to your projects and work with your DNO to factor this in. As an end user with existing connections, if you are persistently exceeding the allocated available capacity to your HH supply points, following the introduction of DCP 161 next year you will be charged an excess penalty rate. This could be up to three times the standard rate and will not be easy to explain internally if no action is taken to engage with your DNO to identify and correct capacity requirements in good time. If you are planning to act, do so in advance, because if other users on your distribution network act before you and take all the current capacity, you will be faced with the additional cost to ensure that capacity is provided by the DNO to meet your requirements.Let’s not forget P272 in the context of DCP161. For your NHH electricity meters that are due to be converted to HH supply points, as part of this transition it will be essential for you to understand and agree the available capacity and maximum demand levels of these supply points with your DNO. The simple message is that any sites incurring excess capacity charges will need to agree a revised capacity, or energy saving measures will need to be considered to reduce their maximum demand.

What should you do?

With regard to the last point, it should be said that in order to manage your energy costs, as well as understanding the electricity you are consuming more closely and ensuring agreement with your DNO takes place in good time, simple corrective action on energy management can be undertaken on-site. By ensuring people, processes and machinery are operating efficiently, or technologies are introduced to reduce demand at source, you reduce the financial risk of exceeding your available capacity. Alfa Energy’s Optimisation service was created to uncover potential efficiency measures and structural savings that may be available to you. Our optimisation analysis is particularly relevant for HH supplies with the forthcoming modifications DCP 161 (capacity charges on HH) and DCP 228 (changes to distribution charges), notwithstanding P272 (transitioning of NHH to HH supplies), to understand and control how much energy you are consuming and when, thus enabling you to act to mitigate significant potential industry pass through cost increases.

Nick Barrance

Nick has 16 years of experience in the energy market, supporting bid management, product development, and the establishment of OJEU-compliant processes for public sector procurement. Prior to joining Alfa Energy, Nick was instrumental in the establishment and growth of an energy consultancy now trading as Kinect and part of World Fuels, providing input to the launch of the company, product development, supplier management. and marketing the business. Nick is responsible for proposal and RFP responses, Service Level Agreements, public sector procurement compliance, and a number of campaign-led initiatives.