Electricity Network Future Charging
Re-cap on the programmes of work that Ofgem is leading on changes to network charging arrangements
Ofgem are leading several related programmes of work with the aim of ensuring that consumers benefit from the transition to a smarter energy system and changing market arrangements. The areas of work are set out below:
Targeted Charging Review (TCR)
Ofgem is leading a Significant Code Review (SCR) to develop new residual network charging arrangements and reform the arrangements which give rise to “embedded benefits”
Electricity Network Access and Forward-looking Charging reform (“Access Reform”)
Ofgem is leading an SCR to develop improved access and future charging arrangements.
Balancing Services Charges Task Force
The industry is leading a review of balancing services charges in parallel with Access Reform and the TCR.
The FCA reforms are being undertaken as a holistic review of transmission, distribution and balancing charging with the three elements running in parallel.
For more details about each of the FCA reforms please see the previous customer update at the website link below. This also explains the difference between “residual charges” and “forward-looking charges” and gives more information about the impact on embedded benefits.
Revised timings and key next steps
The three key changes that Ofgem have announced are:
- TCR – Ofgem consulted on reform of the embedded benefits arrangements and whether they should come into effect in April 2020 or April 2021. Ofgem have now ruled out making these changes in April 2020 and the current preferred implementation date for embedded benefit reforms is April 2021.
- TCR – Ofgem indicated that the preferred implementation date for new residual charging arrangements was either April 2021 or phasing between 2021 and 2023. Ofgem have now put forward implementation in April 2023 as another leading option alongside the other two options.
- Access reform – Ofgem indicated that changes to transmission charges would come into effect in April 2022 and changes to distribution arrangements in April 2023. Ofgem are now proposing to implement all access reforms in April 2023 which will coincide with the start of the next RIIO-2 price control period.
Ofgem has also decided to carry out some further analysis on the interaction between FCA reforms and the Capacity Market. The regulator said that although it expects the CM to be reinstated, it wants to test the modelling against the scenario of it not being in place to ensure a robust decision.
Industry can expect the final TCR SCR conclusions, final impact assessment and direction this summer. This will include further analysis on the implications for deployment of renewables and will ensure consistency in the calculations of the costs of carbon emissions.
Ofgem plans to issue two working papers this year relating to the “Access Reform” SCR. The first will be in the summer and will focus on potential changes to access rights, distribution network charges and transmission demand network charges. The second later this year will focus on other specific changes to transmission network charges, distribution connection charges and access and charging arrangements for small users.
Alongside these Ofgem led reforms, National Grid is leading a Balancing Services Taskforce to help validate decisions about the future direction of BSUOS charges.
Comment: “These are significant programmes of work that will have huge impacts on electricity network charging and the new proposals for an extended timetable are very welcome; more time should help the industry transition to the new arrangements. Aligning implementation with the next RIIO-2 price control period seems to make sense. Total Gas & Power will stay close to the evolution of these proposals and will be actively involved in the development of the changes to protect the interests of non-domestic consumers wherever pos