Contract Power: Why Your Plant Was Given That Number

Seeing a figure like "contract power 300kW" at the top of the bill, it is easy to think it means your plant uses that much. It does not. Contract power is not the amount you used but the capacity held ready for you to use, and the cost of holding it ready is billed to you every month as the basic charge.

What is contract power?

Contract power is the capacity of electricity (kW) a customer has agreed to receive from KEPCO. Regardless of how much you actually used, it is the reference figure against which KEPCO prepares equipment such as transformers and lines so that it can supply that capacity at any time. The cost of that preparation is what is billed at a fixed level every month as the basic charge.

In other words, contract power is not a record of consumption but a promise. If you do not run a single machine this month, your contract power is unchanged, and so is the basic charge that follows from it.

Who sets contract power, and how?

The way contract power is set is laid down in Article 19 (criteria for determining contract power) and Article 20 (method of calculating contract power) of KEPCO's Basic Terms of Supply, and in Articles 11 and 12 of the Implementation Rules (KEPCO's official website, "criteria for calculating contract power", consulted September 2026). It is not a figure set at will but the result of a formula laid down in the Terms.

There are two broad bases for the calculation.

Where a piece of equipment's capacity is shown as both input and output, the input shown is the figure applied. Even if a large output figure in kW is printed on the motor nameplate, the figure that goes into the contract power calculation is the input.

Does adding up all the equipment capacity give you contract power?

No. When the calculation is done on the connected equipment basis, conversion rates that step down by band are applied to the total. The tariff structure already reflects the fact that not all of a plant's equipment runs flat out at once.

(KEPCO Basic Terms of Supply, Article 20(1), as published on KEPCO's official website in September 2026)

A worked example. For a plant whose connected equipment totals exactly 300kW, contract power comes out like this.

You installed 300kW of equipment, and your contract power is 244kW. The Terms provide that where the total of the calculation has a remainder of less than 1kW it is rounded at the first decimal place, so 243.75kW becomes 244kW.

This example is calculated using the conversion rates above alone; actual contract power varies with the equipment configuration and with whether the transformer basis is applied.

Why do contract power and actual consumption differ?

Because contract power comes from equipment capacity, while actual consumption comes from what you ran, and for how many hours, on the day. There is no reason for the two figures to agree in the first place.

At one low-voltage site we observed through our own SaaS, the measured maximum load at 15-minute resolution was 36kW, while the power used in the charge calculation on the KEPCO bill was the contract power of 50kW (July 2026, from observation of our own production data). In effect the site paid a basic charge every month on 14kW of capacity it had never actually used.

The second figure that creates this gap is maximum demand, and which of the two becomes the basis of the charge is settled in the difference between contract power and maximum demand.

What is the loss if contract power is too high?

You end up paying a basic charge every month on capacity you have not used. The basic charge is worked out by multiplying the billing demand by a unit price rather than by consumption, and contract power is what holds that billing demand up.

Article 68 of KEPCO's Basic Terms of Supply splits customers into two paths.

• Customers covered by Article 68(2): the billing demand is the contract power as it stands. If contract power is excessive, that excess is a straight loss.
• Customers covered by Article 68(1): the billing demand is set from maximum demand, but where that value is less than 30% of contract power, 30% of contract power is applied. In other words, however little you use, 30% of contract power is laid down as a floor.

(Basic Terms of Supply, Article 68, in force 1 July 2026)

So if contract power is excessive, a loss arises for either kind of customer, and it repeats every month. The order in which the basic charge itself is calculated is set out separately in how the basic charge is calculated.

What happens if contract power is too low?

Use more than your contract power and an excess-use surcharge is applied. Article 67-3 of KEPCO's Basic Terms of Supply and Article 48-2 of the Implementation Rules (in force 1 July 2026) provide that where contract power is exceeded, a surcharge is levied at the basic charge unit price multiplied by a factor. The first month in excess is only a notice, however, and it is actually billed from the second month.

The point to watch is that the axis on which the surcharge is judged differs by customer group (Basic Terms of Supply, Article 67-3).

So contract power means a monthly loss if it is too high, and a surcharge risk if it is too low. That is why a reduction has to be decided only after working out how much headroom to leave, and that calculation and the application procedure are covered in the procedure for changing (reducing) contract power.

Where do we check our plant's contract power?

If the three figures differ, it may be that a contract change following the addition or scrapping of equipment was never reflected. How to obtain your usage data at the same time is set out in how to obtain your plant's electricity usage data from KEPCO.

How do we judge whether contract power is right?

You cannot judge it from contract power alone. You have to set it side by side with the record of maximum demand over the last 12 months. If the actual maximum load keeps forming well below contract power, that is a signal that the capacity is excessive; conversely, if the maximum load sits right up against contract power, there is no room to reduce it.

That said, reducing contract power is not an easy decision to reverse, so we would recommend securing the data the judgement rests on first and then going through the procedure for changing (reducing) contract power. Contract power also decides whether your plant falls under Industrial (A) or Industrial (B) — it is worth reading the difference between Industrial (A) and Industrial (B) alongside this.