OFGEM are reforming the way consumers are charged for electricity network costs. This impacts both residential and commercial electricity users.
As part of TCR, OFGEM have examined the ‘residual charges’ (TNUoS, DUoS and BSUoS) which recover the fixed costs of maintaining existing pylons and cables, and the ‘embedded benefits’ charged to small and large electricity generators. These two charges will now be calculated using a different method each for residential, small commercial and large commercial electricity users.
The current charging methodology favours those large consumers who can shift their electricity demand to non-peak hours, therefore reducing their eligibility for network charges. This process means other network users must make up the shortfall, which OFGEM see as unfair to smaller consumers.
According to OFGEM, to better align the UK’s market arrangements with those widespread within EU member states, and to provide more effective competition and trade across the EU to deliver benefits to all end consumers.
TNUoS and DUoS
• The charging structure introduces a fixed-per-day residual charge to TNUoS for the first time, rather than the £/MW at Triad, but also introduces new charging bands for both TNUoS & DUoS.
• The fixed-per-day residual charges that customers pay will be determined by:
The new methodology of charges will be implemented as of 1st April 2022.
For metered supplies with no agreed capacity, charging bands will be based on net volumes of consumption and voltage level of supply.
For half-hourly metering, charges will vary depending on agreed capacity and voltage level.
Rates will vary for different regions.
Domestic customers will be allocated a single residual charge.
Please note exact bandings and charges have not yet been agreed.
What does this mean for Businesses?
OFGEM believe that residential customers will end up paying less under this new setup, however non-residential customers will pay more, particularly those sites which utilise load shifting or onsite generation. Overall OFGEM advise that consumers who may see cost increases in the short-term will ultimately benefit from longer-term savings, compared to the current charging scheme.
What should Businesses do?
Capacity analysis: It’s possible to reduce the agreed capacity level, which could not only bring the site in line with lower bandings but would also offer a monthly reduction on energy bills. This is only possible on site which have ‘spare’ or unused capacity.
Use less power overall: Consider all times of day to reduce electricity consumption, not just peak-demand hours. Energy efficiency measures and building controls will help to identify and remove areas of wasted energy. Additional staff training can also help to reduce overall.
How does this affect my supply contract?
For those who have already agreed fully fixed supply contracts with an end date later than 01/04/2022, we are working with suppliers on how and if you will be affected. Please note however that many energy suppliers are still reviewing this internally.
For those whose renewals are due before April 2022, TCR costs will start to be built into renewal offers, which may result in higher prices being received.