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Non Commodity costs
Over recent years non-commodity costs such as distribution and transmission charges, alongside a growing number and size of Government levies, have markedly changed the make up of a customer bill. In 2009, power made up 77% of the bill, with 18% being for Use of Systems and 5% for Government schemes.
Looking at this coming year the make up is quite different, 44% for the power, 28% for Use of Systems and 28% for Government schemes. This can be explained by the growing cost of the Renewable Obligation and Feed-In Tariff costs due to large installation levels since the scheme began in 2010. In addition, the introduction of the Capacity Market and CfD under EMR in 2014 will begin to grow substantially from this year.
What are these costs?
• TNUoS (Transmission Network Use of Systems) – This charge covers the cost of installing and maintaining the transmission system. This cost is increasing due to the upgrade of networks to accommodate renewable generation and to replace aging infrastructure. The average increase to the customer for 2016/17 was 16%.
• DUos (Distribution Use of System) – This charge is paid to the Distribution Network Operator that works in the area where the meter is located. This charge is expected to increase up to 8.5% by 2018/19 depending on the area of the country.
• BSUoS (Balancing Services Use of System) – Balancing the system and making sure there is enough generation to cover demand is becoming increasingly more difficult and costly, particularly in times of peak demand and when unreliable renewable generation is low.
• CCL (Climate Change Levy) – This tax was put in place to encourage a reduction in carbon emissions. Buyers of renewable energy were exempt from this tax until 2015 when the Government’s budget made the change to apply this charge to all energy users. Every April this charge is reviewed and increases by a small amount, however in 2019 this charge will increase by 46%
• Renewable Obligation – This is the main framework to incentivise construction of large scale renewable electricity generation. Although this scheme is closing to new entrants this year, RO will still be a significant charge on customers’ bills for several more years.
• Feed in Tariff (FiT)- This charge is paid to smaller generators of low carbon and renewable power. These costs are expected to rise over 10% in 2016/17.
• BEIS (Department of Business, Energy and Industrial Strategy) – Replacement of the Department of Energy and Climate change (DEC).
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