A capacity fee is one component of electricity supply costs. In many cases, it can be the second highest part of the overall electricity supply rate behind the energy component and may be valued at 10 to 25 percent of annual energy spend.
The capacity fee is assessed based on electricity usage at the ‘single peak hour of electricity demand’ on the entire New England grid in the calendar year, also known as Annual System Peak. Demand for electricity usage at that peak hour is assessed as a ‘capacity tag’ effective June 1 of the following year and defines capacity fees for 12 months.
Our team has advised clients for years during the Annual System Peak and assists clients in managing capacity assessment charges. Our team takes a proactive approach to reduce peak load by monitoring and evaluating influencing factors each day, including grid demand, weather forecasts, and historical data to predict when the ‘peak hour’ may occur. Notifications are typically sent to clients two days in advance of a potential peak, usually averaging three to five times each summer.