All users of Great Britain’s electricity network pay to use it. Users include generators, who use the network to transport the electricity they generate to where it is needed, and demand users who use it to obtain electricity when they need to use it.
How users are charged, and the type of charge they receive, depends on how they use the system. There are three main types of charges:
Transmission Network Use of System charges – TNUoS
TNUoS charges recover the costs of installing and maintaining the transmission system and are charged to all suppliers and generators.
TNUoS covers costs for England, Wales, Scotland as well as offshore. It’s the role of the Electricity System Operator (ESO) to recover the revenue on behalf of transmission owners.
Balancing Services Use of System charges – BSUoS
BSUoS charges recover the costs of the day-to-day operation of the transmission system. This includes the complex task of balancing the electricity system (keeping supply and demand in perfect equilibrium) and ensuring safety of supply.
This role is carried out by the ESO, and the charges depend on the balancing actions we take each day. We provide a monthly forecast of BSUoS to help those who pay BSUoS charges plan for how much it will cost their businesses.
Generators and suppliers are liable for BSUoS charges, which are calculated daily for each half hour period.
Electricity Connection charges
Connection charges recover the cost of installing and maintaining assets which is required to connect to Great Britain’s transmission network from the individual connectee, such as a generator.
Charges consist of a capital component and a non-capital component – which, broadly speaking, represents the cost of constructing the connection assets, and the assets’ depreciation. Charges are calculated annually and published in January for each user and take effect from 1 April each year.
A further charge (which replaces an earlier arrangement referred to as the 'hydro benefit') is Assistance for Areas with High Electricity Distribution Costs (AAHEDC).
We recover the AAHEDC through a charge on all suppliers. This is passed on to Scottish Hydro Electric Power Distribution Ltd. The North of Scotland is a large area, with a relatively low population, and this scheme helps to keep the local distribution charges lower for the business and households connected there. It’s currently the only area specified to receive this assistance.
How are the charges calculated?
TNUoS tariffs aim to reflect the cost of using the network, to help network users make efficient decisions about where and when to use it. Charges vary by location, reflecting the costs that users impose on the transmission network to transport their electricity.
Demand users who pay half-hourly tariffs are charged according to what they used at the three highest peaks of system demand (known as triad periods – which cover the highest demand period between November and February each year). These tend to be large businesses.
Generator users also pay based on a capacity value agreed between them and the ESO – this is known as Transmission Entry Capacity or TEC.
There is also an Embedded Export Tariff for those generators who are connected to the distribution network with TEC<100MWs. This is based on the generators export over the Triad periods.
How do we know charging is fair, gives value?
The charging methodology we use produces tariffs that vary by location based on how close a generator is to demand or how close the demand is to generation.
This incentivises generators and demand to be close to each other reducing the need for investment in the transmission system.
The methodology is defined in the Connection and Use of System Code (CUSC) and subject to industry open governance. The ESO keeps the methodology under review and proposes changes where necessary as well as working with Ofgem and other stakeholders to identify areas for improvement.
The future of charging
Charging arrangements are fundamental to how the electricity market works to meet our energy needs. As we transition to a more decarbonised, decentralised, and digitised energy system, network charging arrangements need to evolve with it.
We are supporting industry with this change through the Charging Futures Forum - a place for industry to understand, collaborate, and shape the implementation of significant electricity network charging reform across the whole system.