Third Party Charges shutdown effect

With the UK national electricity demand reducing as non-essential businesses close and employees work from home, there has been a great deal of focus on reforecasting users wholesale consumption, but what affect will there be on the non-commodity charges that make up the remaining 60% of an invoice?

Contracts for Difference (CfD)/ Capacity Market Supplier Service Charge (CMSC)/ Feed in Tariff (FiT)

All the above charges are based on a cost to run spread over the chargeable demand. With the country using less energy, there is less consumption to spread the cost over and the charges will be increased accordingly to ensure costs are recovered.

In addition, the CfD subsidy to generators is based on the difference between an agreed strike price and the market price. With wholesale prices so low this subsidy will be higher than normal.

Both CfD and FiT rates are calculated quarterly so any increases will be seen by users on pass through contracts within the next month or two.

Transmission Network Use of System (TNUoS) & Distribution Use of System (DuoS)

Transmission and Distribution network operators’ revenue is based on a forecast of how much demand they expect on their network. A decrease in demand will mean that suppliers will have to adjust their charges accordingly to ensure they still recover the same amount of revenue. Charges from April this year to March have already been set, however price controls are set over multiple years so future periods may see an increase to account for losses incurred during the present.

Balancing Use of System (BSUoS)

This rate for BSUoS is based on the National Grid’s need to balance the network. With decreased demand versus the expected generation, National Grid will have to work harder to ensure supply and demand are balanced. The costs associated with this will be passed onto consumers.

The BSUoS costs change daily and so users on pass through contracts could start to the see the changes on their next invoice.

Renewable Obligations (RO)

The Renewable Obligation levy rate will not change as it has already been set this year and is based on both demand and tied to inflation. The rate next year will depend on how the government forecasts both of these.

Climate Change Levy

The CCL rates have been set by the government for the next few years so this is unlikely to change unless the government makes a wider decision on the state of the economy.