April showers bring DUoS for every half hour

Almost two years ago, Ofgem approved DCP268 DUoS Charging Using HH Settlement Data, which will move existing non-Half Hourly (NHH) settled demand customers onto time-based Half Hourly (HH) Distribution Use of System (DUoS) unit rate charges. With the modification to be implemented in the DCUSA on 1 April, we revisit the changes and consider the impacts on the market.

Currently, DUoS charges under the Common Distribution Charging Methodology differ between HH settled and NHH settled customers. While HH customers face three-rate Red/Amber/Green p/kWh unit rate charges based on half-hourly consumption within each time band throughout the day, NHH customers receive a single p/kWh unit rate DUoS charge (or a two-rate tariff where the meter is capable of recording peak and non-peak volumes). Distribution-connected intermittent generation is currently credited with DUoS on a single-rate unit basis, while non-intermittent generation receives credits on a Red/Amber/Green basis.

From 1 April, all NHH customers will be moved onto Red/Amber/Green (RAG) tariffs, with consumption data for each half hour being estimated using aggregated profiled data. NHH unmetered customers will move to comparable Black/Yellow/Green (BYG) unit rate charges. The use of profiled data means that customer charges will not reflect actual consumption in each time band, and customers will not be able to reduce their exposure to charges by changing their consumption patterns. However, the change will lay the foundations for time-of-use tariffs, as when all customers move to being HH settled the intention is that they will be exposed to time band charges using actual HH consumption.

Following the implementation of DCP268, intermittent and non-intermittent generation will both face the same RAG charges, meaning that non-intermittent generation will be able to be rewarded for generating at peak when they can offset demand. This should address issues with distribution-connected intermittent generation being overrewarded for generating during off peak periods and underrewarded for generating at peak. The DCP268 change report suggests that the change will increase generation credits in all regions, potentially up to a maximum of 18.42% depending on region and alignment of generation to demand peaks. Demand customers may also see an increase of up to 2.6% in charges as a result of the NHH profiling and the intermittent generation changes.

The overall effect of the changes is that the existing 33 DUoS tariff bands will reduce to 16. In approving the change Ofgem said that this should allow greater flexibility for suppliers to offer time of use tariffs in the future. Distribution network operators (DNOs) and suppliers will need to have amended their billing systems in order to cater for the new tariffs and the use of RAG and BYG for existing NHH customers instead of the settlement time pattern regimes. There will be no impact on settlement volumes.

While the immediate impact of the changes for demand customers may not be ground breaking, the move towards time-based DUoS for all customers is seen as a stepping stone to a future where all customers will face charges based on their actual half hourly usage. For intermittent generation connected at the distribution level, the changes may boost revenues as DUoS credits increase, with more reward for generating during peak demand. While there may be further changes to the DUoS tariff arrangements made under the Network and Forward Looking Charges Significant Code Review that could supersede DCP268, these reforms are still a way off, and the changes coming into effect from April should provide a solid platform to build more cost-reflective DUoS charging arrangements in the future.

Keeping track of code modifications and understanding the potential impact for your business can be time consuming, but missing something can bring about significant challenges and risks for your organisation. Our Electricity Modifications Register provides a comprehensive, independent and plain-English update and review alerting you to the most critical governance issues affecting the market – and potentially your business.  Likewise, our Weekly Customer Impact Reports provide you with tailored advice on the likely impact of changes to processes, commercials or systems. For more information please contact regulation@cornwall-insight.com.

Related thinking

Energy storage and flexibility

Waiting to connect: the problems and solutions for network connection queues (Part 2)

Network connection queues continue to be a notable topic of interest as many generators face significant delays to project development – an issue that is directly conflicting with net zero ambitions and recent focuses on strengthening domestic energy supplies. In Part 1 of our two-part series on connection queues we...

Home supply and services

Addressing consumer harms in the non-domestic market

In recent months, Ofgem has shone a light on areas across both the domestic and non-domestic market where suppliers could improve their practices for customers and go beyond what they are obligated to do in the licence conditions. In a time of significant and extended volatility, the regulator has brought...

Energy storage and flexibility

Waiting to connect: the problems and solutions for network connection queues

The number of grid applications has risen significantly in recent years, resulting in increased pressure on the electricity networks to facilitate new connections. In its Energy Security Strategy, the UK government set out ambitions for 95% of electricity to be sourced from low carbon generation by 2030, and for the...

Energy Market Design

Are prices going to rise in Contracts for Difference Allocation Round 5?

A number of factors may be about to put an end to the trend for falling energy prices in the Contracts For Difference (CfD) scheme. The CfD scheme has provided strong subsidy support whilst also providing consumers robust levels of protection. High investor confidence and steady reductions in capital costs...

Business supply and services

What happened in 2022 in the energy market?

The GB energy market never stands still and 2022 was no different. In this infographic, we look back at some key happenings from the past year in different segments of the GB energy market.  Click the image below to see our snapshot.

Business supply and services

Terms and conditions apply: Ofgem looking further into business market

As turbulence has continued in the wholesale energy markets throughout 2022, including through the crucial October contracting round for the business supply market, non-domestic energy suppliers have come under considerable pressure. Firstly, they have had to attempt to pass through extraordinary price increases to customers in recent months, particularly if...

Energy storage and flexibility

Energy Market Bulletin: 2022 Review of Power and Gas

2022 has positioned itself firmly as one of the most memorable for the energy sector in recent years. We have witnessed seismic changes in the wholesale cost of energy, transformational proposals for market reform and two new Prime Ministers. In our last Energy Market Bulletin report of 2022, we have...

Energy storage and flexibility

Balancing Reserve: ESO proposes new regulating reserve service

In recent months National Grid ESO has been developing a new reserve service to improve the management of the system and enable the grid to accommodate zero carbon operation of the electricity system by 2025. On 28 September the ESO first announced at their Autumn 2022 Markets Forum, a proposal...