As the UK’s energy system evolves into a more decentralised and decarbonised framework, we hear more and more about the growing importance of flexibility around consumption.
Indeed National Grid depends on large consumers reducing demand during winter peaks as a vital balancing tool – as well as participating in demand side response initiatives during other times of system stress.
Yet while those consumers that are able to utilise some flexibility can benefit from lower network charges, those that can’t end up picking up a larger share of the bill.
Disparity in the spotlight
It’s this disparity that Ofgem is keen to address in its Targeted Charging Review (TCR) and Significant Code Review (SCR).
At the same time, Ofgem is also looking to structure charges to provide better signals about the costs and benefits users confer on the network at a given time and place.
Of course, some users are still going to be able to better respond to signals than others – so how these two aims will marry up is going to be interesting.
If you happen to be free this Thursday (30 November), Ofgem is holding a workshop to share more information in London. You can register here.
TNUoS, DUoS and BUoS under review
As part of Ofgem’s TCR and SCR, Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) charging methodologies are under review. Balancing Use of System (BUoS) charges may also be in scope.
TNUoS and DUoS charges include a forward-looking element, which is the locational component designed to send signals to encourage the efficient use of the network. They also include a residual element, which is the ‘top up’ payment that ensures the full revenues that network operators are allowed to collect is recovered.
Both the forward-looking locational charges and the residual elements are under review.
How this will play out is not yet known. It’s highly likely we’ll see a weakening of the Triad signal. This means that consumers who are able to load manage during peak times to reduce TNUoS charges may pay more, possibly through a fixed or capacity-type charge.
Tight timescales for change
Ofgem’s proposed timescales for implementing changes are very tight.
The residual charges review is looking to run as follows:
- Draft Impact Assessment and ‘minded to’ decision on any proposed new residual charging arrangements published – Q2 2018.
- Consultation is likely and will occur at the same time – Q2 2018.
- Decision and Final Impact Assessment on any new residual charging arrangements published – Q3 2018.
- If changes are going to made, modifications would then need to be raised – Q3 2018.
- Final decision on the resulting modifications – early 2019.
- New arrangements to come into effect – from the 2020/2021 charging year.
On the other, forward-looking locational element of charges, we are expecting this to take slightly longer.
We are joining an industry task force that has been set up to look at the issues around this, so will keep you posted.
Representing the interests of customers
From our perspective, we will be working hard to ensure the views and interests of our customers are fully represented. In particular, we will be aiming to:
- Get early clarity on the likely options for change.
- Press for sufficient transitional periods to ensure that customers are not detrimentally impacted by short implementation timescales.
- Ensure that changes implemented are practical for customers and the Industry.
Once more information becomes available, we will be sharing it with you, and also arranging appropriate communication channels to aid greater understanding and to ensure that your views are captured.
In the meantime, if you are able to attend the Ofgem workshop this Thursday, members of our Network Charging team will also be there and will look forward to meeting you.