Network charging – what’s been going on and why should I care?

Across Great Britain there are ~810,000km of wires and underground cables that make up our electricity network. Split between the higher voltage, transmission system and the lower voltage distribution system, these lines and cables are responsible for transporting electrons up and down the country to provide consumers with the necessary electricity they need.

However, accessing, and subsequently using the network costs money. Use of the transmission system will incur transmission network use of system charges (TNUoS), while using the distribution system will make you liable for distribution use of system charges (DUoS). In recent years, Ofgem and wider industry have been reviewing how users can access the network and consequently how they should pay for using it. With lots of changes going on, and over a long period of time it can be tricky to keep a handle on all these reforms, but with generators, suppliers, consumers and storage operators all impacted in some way it’s important to be in the know and keep up with the latest developments.

Where have we been?

As an industry, we are edging ever closer to the end of two separate network charging significant code reviews (SCRs). The Targeted Charging Review (TCR) is almost complete and come April 2023 – aside from any further housekeeping amendments – all intended reforms should be implemented. This includes changes to the residual charges for DUoS and TNUoS, as well as changes to the balancing services use of system (BSUoS) charge so that it is based on gross demand, rather than net, and only paid by final demand users. The BSUoS reforms will remove distortions both within GB, between the transmission network and the distribution network, and between GB and the EU given EU generators are not liable for balancing charges.

The second SCR nearing completion is the Access SCR. While it was originally supposed to include wide-ranging DUoS reforms, as well as assessing the possibility of TNUoS for small, distributed generators, the final direction just addressed changes to access rights and the connection boundary. We will come on to what happened to the further DUoS and TNUoS developments, but the access rights and connection boundary reforms are currently at code modification workgroups. The outcomes of the Access SCR are intended to support earlier connection to the network, and reduce the costs paid by connectees when connecting to, and reinforcing the network. Ofgem considers this should support the deployment of low carbon technologies as well as facilitating the rollout of electric vehicle infrastructure.

Where are we going?

Nearing the end of two network-related SCRs is no reason for laurels to be rested upon. Ofgem is already beginning two new workstreams to further consider network charging reform. A formal DUoS SCR is in the making, which will cover the wide-ranging review of DUoS that previously sat within the Access SCR but was subsequently broken out. Further industry participation will begin in the coming months. The second workstream is the launch of TNUoS Task Forces. Applications are currently open for the first Task Force which will consist of 16 members including Ofgem, the ESO, as well as supplier, generator and storage operator representatives. While fundamental reform of the TNUoS model and methodology is off the table for now, the Task Force may well still result in tweaking to the methodology along with a set of CUSC modifications to address any identified defects.

We are still waiting for clarity on much of the work to be completed through DUoS SCR and TNUoS Task Forces, and we will be providing regular updates on all developments falling out of these workstreams through our regulatory service as and when we get them. We will be issuing alerts on the key policy decisions; our modifications and consultations registers, and weekly reports will provide insight on minded-to positions and code modifications; and we will be discussing all the updates at our supplier, generator and flexibility forums.

There is a clear understanding that network charging reform is going to be completely necessary if net zero targets are to be met. Ensuring the right incentives are provided to the right users both when connecting to and using the network will be essential. While impacts to consumers can be minimised, there is also a clear need for investment in the network meaning that the network element of the consumer bill is unlikely to drop any time soon. However, the ways in which consumers interact with and access the network is likely to change in the future and there may be cost savings and revenue opportunities arising from network innovation.

For more information on our regulatory service or to find out more about how we can support your business through the network charging landscape please get in contact with Tom Faulkner on 01603 542123 or email t.faulkner@cornwall-insight.com.

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