How to Reduce Capacity (Demand) Charges

For facility managers who realise an electricity bill is more than just consumed energy, the capacity (demand) charge is often a hidden cost. This component is billed on the contracted power agreed with your distribution company, regardless of how much energy you actually use. Even if your panel sits idle for months, a high contract power means a fixed charge every single month. Argus EMS makes this fixed item visible and manageable.

What Is the Capacity (Demand) Charge?

The capacity charge is the price of the network capacity reserved for you. Contract power (connection or agreement power) is defined in kVA or kW, and the grid allocates infrastructure so you can draw that power at any moment. Under EPDK regulations, this fixed component appears on the bill separately from the energy you consume. In many facilities the contract power was set years ago with a cautious estimate and never revisited, which means a fixed cost higher than necessary.

Demand Overshoot Penalties

Peak demand exceeding your contract power leads to extra charges and overshoot penalties. The grid typically evaluates your power in 15 minute measurement windows; the average demand within that window sets your billed value. A single short spike can trigger a penalty for the entire month. That is why measured 15 minute demand, rather than raw instantaneous power, should be monitored. Argus EMS continuously tracks this window and raises an early warning as you approach the limit.

Right Sizing Your Contract Power

The ideal contract power should be neither high enough to waste money nor low enough to invite penalties. An oversized agreement power means a fixed charge wasted every month, while an undersized value risks overshoot penalties. Correct sizing requires analysing your historical demand profile. Argus EMS evaluates months of accumulated 15 minute demand data so your contract power can be optimised against real need.

Power Factor and Apparent Power

Reactive load increases apparent power (kVA) and therefore raises charges based on contract power. A low power factor forces you to draw more kVA from the grid for the same useful work. Correcting the power factor with a capacitor bank or compensation lowers apparent power and delivers a visible reduction in the kVA based capacity item. Argus EMS reports power factor and apparent power together to reveal where compensation is needed.

Cutting Costs with Peak Shaving

Peak shaving means reducing peak demand by shifting or temporarily curtailing flexible loads during the short windows where the demand peak forms. Loads such as chillers, pumps and charging stations can be spread out over time without affecting operations. Even a few kW of peak shaving can open the door to a lower contract power. The table below summarises the main reduction paths.

Developed by Neva Otomasyon, Argus EMS combines demand monitoring, contract power optimisation and overshoot early warning in a single panel so the capacity charge stays under control. Continuous measurement and retrospective analysis both prevent penalties and recover the fixed charge you have been overpaying.