Gautham,

To some extent, it differs from utility to utility, and nation to nation.

In the context of India, I suggest you look up the website of the Central Electricity Regulatory Commission (CERC) and its state level affiliates.

-Sanjay

Dear Gautham,

Capacity obligations are determined by a customer's peak load contribution (PLC) or peak monthly demand during a certain timeframe. The time frame for determining this peak is calculated differently in each ISO/RTO.

Generally speaking, the cost for capacity is a factor of a consumer's capacity obligation (i.e. their PLC or peak demand) measured in kilowatt hours, and the daily cost of capacity (cost for their supplier to procure capacity in their market) measured in dollars per kilowatt hour, as well as the number of days in a particular billing cycle. Because all of these numbers can vary by market and by month, capacity charges can also vary by billing cycle.

As the others have stated, this differs from utility to utility. For some insight, in the UK the capacity charge is based on an agreed Maximum Import Capacity (MIC) and/or

Maximum Export Capacity (MEC) in KVA. The capacity charge then is:

charge = k * MIC * t,

where k is the cost factor in pence/kVA/day, and t is the number of days in the billing period.

The cost factor k is different in each region, and there is, of course, a penalty for load or generation exceeding the MIC or the MEC. 

Thanks for the answers.

As an example of the capacity charge, can I assume it to be the 'fixed charges value' that are mentioned in our domestic/home electricity bills?

And I think that value should be divided by the total number of days, the electricity had been billed for, to get per day capacity charge?