Policy Impacts

Balancing Services Use of System: Time to have your say

Posted on 10 August 2020
By Helen Inwood
Helen Inwood
Non Commodity Charging Manager

Helen currently leads a team who are responsible for the forecasting of Non-Commodity Charges for costing purposes, with a main focus on understanding and influencing the regulatory changes that affect these costs.

Balancing Services Use of System (BSUoS) charges have been in the spotlight recently, thanks to the increased costs National Grid is incurring to balance energy supply with reduced lockdown demand.

But these charges – which are included in every electricity consumer’s bill – are also attracting attention due to a review instigated by Ofgem to look at how they are charged and recouped.

This is an extension of Ofgem’s Targeted Charging Review (TCR), which saw a huge shake-up to the charging methodologies for transmission and distribution charges.

After some initial work, a second Balancing Services Charges Taskforce has now produced an interim report into the future of BSUoS charges, which can be viewed here.

Shifting charge to consumers only

This report concludes that:

• Final demand consumers should pay all Balancing Services charges. (Currently, generation also pays a 50% share of these costs.)

• BSUoS charges should be set as a tariff in advance. (Currently, consumers pay BSUoS on a £/MWh for every half hour of consumption, calculated after the event.)

While the shift of BSUoS to demand only will mean charges double, this increase should be netted off by a drop in wholesale prices, as BSUoS charges for generation will no longer apply.

However, the Task Force has also highlighted the importance of the timing of this change being implemented to avoid a detrimental impact on consumers.

Care to avoid double charging

If implementation timescales are too short, there is a possibility that some customers could end up paying twice for BSUoS.

For example, if they have already purchased power in the wholesale market which was priced to include the generators’ share of BSUoS. And then, after this change is implemented, they are charged again for that share of BSUoS when the energy is finally delivered.

The Task Force is suggesting that two years after the April following the decision date is a sufficient period to avoid this happening. So potentially, we are looking at April 2023 before any BSUoS changes come into force.

Fixing for greater certainty

Fixing BSUoS charges ahead of time is likely to prove popular, as this will provide greater certainty over what is currently a volatile charge.

However, the fix duration and notice periods are still to be decided. Plus whether the charge is levied on a volume (£/MWh) or on a site basis (£/day), perhaps even mirroring the new bandings that are being introduced for distribution and transmission charges in April 2022.

Consultation deadline of 26 August

Consumers and other interested parties are now being asked to submit their views on what’s being proposed via a consultation, which closes on 26 August.

This includes questions on who should pay, the notice period for implementation of the changes, the risk of ‘grid defection’, fixing BSUoS charges ahead of time (notice periods and fixed timelines) and whether any interim measures are necessary.

These questions relate to information set out in the Balancing Services Charges Taskforce interim report.

You can access the consultation document here.

In the meantime, if you have any questions about BSUoS charges – or any other non-commodity element of your invoice – please contact your Client Lead (for existing customers). Or email us via nBS@npower.com.

Comments

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  • Stephen Evans
    09 September 2020 at 3:59 PM
    I work closely with Helen
  • Stephen Evans
    09 September 2020 at 4:0 PM
    Great post, really well written.