Winners and losers in forthcoming energy charges shake up

Despite the snowy weather last Friday, we had a good number of participants join us for our Targeted Charging Review webinar.

This major shake up in the way in which electricity transmission and distribution costs will be billed to consumers is creating a lot of uncertainty.

Indeed, at the start of webinar, when asked “Do you know how these proposed changes might impact your business?” 75% of participants said no.

Interestingly, by the end, 78% were able to say they felt more adequately informed.

 

Reducing time of use charging

Ofgem’s Targeted Charging Review (TCR) is looking at how the residual element – which can be a major part of the charge – will be calculated for Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) charges in the future.

TNUoS and DUoS charges are made up of two parts – the ‘forward looking’ element, which gives the locational signal for the tariffs, and the ‘residual’ element, which is a top-up charge to ensure that Network Operators recover the correct revenue.

Currently, residual charges for both TNUoS and DUoS are geared around time of use – so enabling consumers who are able to be flexible and reduce consumption during peak times to reduce their share.

But ensuring those consumers who are not able to be flexible don’t end up paying more is a key goal for Ofgem. Another driver is finding a way to make charges more applicable to the way in which the network is evolving. Hence this review.

 

Higher bills for some, lower bills for others

For many large consumers who currently reduce Grid demand at peak times – including during suspected Triad periods – this change is likely to equal higher bills.

But how much will really depend not only on your consumption pattern but also on where you’re located on the network. Some consumers will certainly pay more – but others will pay less.

Ofgem has put forward two possible options to revise TNUoS and DUoS charging methodologies in its recently-published ‘Minded to Decision’. Consumers were invited to submit feedback by 4 February, and we expect Ofgem will then publish its final decision in July 2019.

These two options – and the likely impact to different businesses – were discussed in our webinar. And you can request a copy of the self-explanatory slides by emailing us via nBS@npower.com.

Once agreed, the changes are likely to be introduced by April 2021, with a possible phasing period delaying full implementation until April 2023.

Embedded generator benefits are also under review – and more detail is included in the webinar slide pack (which, as before, you can request via nBS@npower.com).

 

The future of flexibility

Naturally, many consumers who’ve embraced consumption flexibility and demand side response practices are concerned about how these changes will impact the cost savings they are currently achieving.

Dan Connor, our DSR Development and Delivery Manager in Energy HQ, was able to provide a summary of key impacts during the webinar – and also new opportunities going forward.

For example, Triad management currently delivers 2GW of critical demand reduction during the winter peaks. With the Triad incentive mechanism removed or significantly reduced – and that 2GW in question – markets (Wholesale and Ancillary Services) will need to adjust to mitigate this.

 

If you’d like to find out more about how the changes may affect you and to speak to our experts or request the webinar slide pack, please email nBS@npower.com. Or talk to your Client Lead (for existing customers). You can also contact our experts at Energy HQ by calling 0800 994 9382.