Brace for impact

As Ofgem and National Grid rethink how commercial customers are charged for electricity transmission costs, businesses will see significant changes in what they’re paying and when. MBS considers the proposed changes and how they might impact energy use.

TNUoS – Transmission Network Use of System. Charged by location and recovers the cost of installing and maintaining the electricity transmission system. Generators and suppliers are liable for these charges.

BSUoS – Balancing Services Use of System. A daily flat tariff. Recovers the daily running costs of the transmission system. Generators and suppliers are liable for these charges.

DUOS – Distribution use of System charged to electricity users on their energy bill and covers the cost of delivering energy and maintaining infrastructure

Power usage is not the only element that makes up the cost of managing and operating the UK’s electricity infrastructure. There are a number of payments and incentives designed to keep the system going, and to ensure that we all have electricity at the flick of a switch.

But Ofgem is now taking a close look at how these charges and incentives are calculated. The review is driven partly by costs and also by an element of what’s fair to the majority of business customers.

This is particularly significant as those affected will be on Half-Hourly (HH) metering, which is a category increasing numbers of businesses will find they fall into with the switch to smart metering.

HH metering means more accurate bills, but it can also mean higher costs. Your organisation would be liable for peak electricity charges, during what are known as ‘Triads’. These are the three peak half-hours of demand over winter season. Expect to see your price per kilowatt hour rise into three figures.

These prices are also based on location, so London charges are much higher than in Scotland, for example.

Smart business electricity users have been using ‘load shedding’ for some time. This is the use of building controls to drop electricity use at peak times, by turning off services such as cooling or heating (without impact on users) or some other power-using element of the building.

One of the most significant elements of the re-think on how we pay for energy is that load-shedding of this nature isn’t available to all businesses – so it’s not really fair.

As it says in the launch of its Significant Code Review (SCR) from 4th August 2017, this means that ‘...current residual charges will increasingly fall on those network users who are not able to do this (which is) likely to include residential and small business consumers.’

The close of consultation on this topic should be around the end of 2017. In his blog, David Reed, head of Npower Business Solutions, says that it’s likely that the Triad charges will change and, “we may potentially see... a balanced year-round charge, or another mechanism entirely.”

If businesses have not been paying much attention to these issues before, they should certainly be encouraged to now. Load shedding has been a useful solution. If the emphasis changes from energy usage ‘peaks’ to year-round usage, that paints a different picture of how energy

management might work for building owners and managers.

National Grid and Ofgem are also reconsidering how they incentivise small Embedded Generators (EGs). These EGs who generate less than 100MW each, are paid an incentive to supply to the grid at peak times. The incentive tariff now is around £45 per kW.

Ofgem believes the payments are not worth that amount. It has announced that it is going to reduce the tariff. The new rate won't be announced until later in Autumn 2017, but looks to be between £3 and £7 per kW – a massive cut.

Generators and users face challenges. As the UK moves to greater reliance on renewables for electricity generation, availability becomes less stable and energy efficiency a much more pressing issue. For those involved in designing and operating buildings, the next couple of years could be a good time to take a close look at energy use as well as on-site security of supply.

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