Demand Management — Contracted Capacity

The Problem

Why Is the Capacity Overrun Charge Noticed So Late?

For facilities supplied at medium voltage, the invoice is not made up of consumed kWh alone. The distribution company charges a capacity fee on the contracted capacity, and when the month's highest 15-minute average demand exceeds it, a capacity overrun charge is added for the excess. A single 15-minute interval decides this line: a facility that runs smoothly all month can set that month's overrun with a few large loads starting at the same time.

The problem is that this is usually learned when the invoice arrives. By then the month has closed and the overrun cannot be undone. Overruns repeated in consecutive months show that the contracted capacity does not match the facility's real load; either load must be shifted or the contract reviewed.

The opposite is costly too: a contracted capacity far above the real peak means paying a capacity fee every month for capacity that is never used. A sound decision needs the monthly peaks on the same screen. We cover the ways to reduce the capacity fee in detail in the reducing the capacity charge article.

How It Works

15-minute average demand for transformers and main meters (kVA and kW)

Status band relative to contracted capacity: oversized, healthy, approaching, at limit, exceeded

In-month peak forecast: month-end projection from the month's peak and recent trend

Warning when the forecast reaches 90% of contracted capacity, critical alarm on overrun

Several transformers are summed simultaneously in the same 15-minute interval — one supply point, one contract

Monthly peak demand history and a two-consecutive-month overrun flag

Alerts arrive by email; alarm history is kept for audit

What Share of the Contracted Capacity Is the Peak Using?

Argus EMS divides the 15-minute demand by the contracted capacity and places the result in one of five bands. The band shows both overrun risk and an oversized contract on the same scale.

Ratio	Status	What to Do
Below 70%	Contract oversized	Reducing the contracted capacity can be considered
70% – 85%	Healthy	Keep monitoring
85% – 95%	Approaching	Load-shifting options are investigated
95% – 100%	At limit	The start-up order of large loads is planned
Above 100%	Exceeded	Overrun charge risk; the source of the peak is found to prevent a repeat

Lowering Peak Demand and Demand Response

The way to prevent an overrun is usually not to consume less but to spread consumption over time. Sequencing chiller groups, compressors, furnaces or charging stations so they do not coincide in the same 15 minutes lowers peak demand while total kWh stays the same. Because Argus EMS tracks each device's power separately, you can see how much each load contributes to the peak, and the shifting decision is made with that data.

Demand response programmes ask the same question: how much load can the facility release on request, and for how long? The answer lies in the historical 15-minute profile. For the cost effect during peak hours, see the shifting load out of peak hours article.

Who Is It For?

Factories and industrial-zone sites supplied at medium voltage, with a capacity charge on the invoice

Hospitals, shopping centres and campuses whose transformers share one contract

Facilities where large loads such as chillers, compressors or furnaces start together

Energy managers considering reducing or increasing their contracted capacity

Technical Specifications

Feature	Value
Demand interval	15-minute average
Measurement source	Transformer / main panel energy analyser (Modbus)
Comparison	Contracted capacity (kVA) — project total or per transformer
Warning	When the month-end forecast reaches 90% of contracted capacity
Critical alarm	When the month's peak or the forecast reaches contracted capacity
History	Monthly peak demand, consecutive overrun flag

Go Deeper

Demand data comes from the transformer; for load ratio and temperature see transformer monitoring, and for kWh and tariffs see electricity consumption monitoring. How alerts are produced is explained on the alarm engine page, and the effect of the capacity charge on the monthly budget on the budget projection page. For industrial sites, factory energy management is the starting point.

Demand Management — Frequently Asked Questions

What is contracted capacity?

Contracted capacity is the maximum power the facility may draw under its connection agreement with the distribution company. Under a two-part tariff the capacity fee is calculated on this value, and when the month's highest 15-minute average demand exceeds it, a capacity overrun charge for the excess is also added to the invoice. Amounts depend on the distribution tariff.

What is the difference between demand and instantaneous power?

Instantaneous power is the draw at a given moment; demand is the average over an interval, which for this charge is 15 minutes. A motor's inrush current makes instantaneous power spike but barely moves the 15-minute average. Because the overrun is set by the average, Argus EMS ties its warnings to the 15-minute average rather than the instantaneous value.

How do I find out before an overrun happens?

Argus EMS forecasts the month-end peak by combining the highest demand of the month's completed days with the trend of recent days. A warning email is sent when the forecast reaches 90% of contracted capacity, and a critical alarm when the month's peak or the forecast reaches it. That leaves time to shift load in the remaining days.

We have several transformers but one contract. How is it calculated?

The distribution meter measures the total at the facility's supply point. Argus EMS likewise sums the transformers' demand in the same 15-minute interval and compares it with the project contract. If separate contracts are defined per transformer, each transformer is also tracked against its own value.

Should we reduce our contracted capacity?

If the monthly peak stays well below the contracted capacity, you may be paying a capacity fee for capacity you never use; Argus EMS shows this in the 'contract oversized' band. The decision should be made with data covering the seasonal peaks and together with the distribution company's terms.

Are our existing meters enough?

An energy analyser at the transformer output or main panel that can be read over Modbus is enough; most facilities already have one. The field unit reads the analyser over the local network; even if the internet drops, readings are held in the local queue and transferred when the link returns.

Demand Management: Know Before the Contracted Capacity Is Exceeded