Capacity Charges
The portion of your bill that pays for generation kept on standby to meet peak demand.
Definition
Capacity charges recover the cost of ensuring enough generation is available to meet system peak demand and maintain grid reliability.
Detailed explanation
In many markets, your capacity charge is set by your contribution to the grid's peak — often measured during a handful of the highest-demand hours in the prior year. That figure, called an Installed Capacity or capacity tag, can apply to your account for the following year, making peak periods disproportionately important.
Why it matters
Capacity can represent a meaningful share of the all-in cost of electricity. Managing usage during peak-setting hours (peak shaving) can reduce your capacity tag and lower costs.
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