UK Electricity infrastructure prices increase in April-2016 by an average of 13%

Charges for the cost of UK distribution and transmission charges for consumers has been released (final charges for distribution and indicative charges for transmission) and are showing considerable increases for consumers.

UK Electricity infrastructure prices increase in April-2016 by an average of 13%

These increases are based on:

  • Transmission charges are increasing based on the future requirement to invest in grid stability and enhancement and the perception of future peak demand (for the recovery of costs) given the potential for energy efficiency and demand reductions schemes to reduce future peak demand – and in turn reduce revenue. The RIIO regulatory regime allows charges to rise to compensate for reduced peak demand.
  • Distribution charges are increasing in the majority of areas and will continue to vary by location dependent on the future infrastructure required to support a greater level of embedded generation (generation connected to the local grid such as consumer self-generation), the requirement to increase investment in new technology to balance the grid and the future challenges faced by the regional networks in supporting the growth of more intermittent low carbon technologies.
UK Electricity infrastructure prices increase in April-2016 by an average of 13%

The key charges under analysis are:

  • The UK Distribution charge (commonly referred to as DUoS). This is a regulated charge levied upon the supplier and passed down to a consumer through the electricity bills and supports the maintenance and on-going investment in each of the local distribution grids which manage the supply to consumers.
  • The UK Transmission charge (commonly referred to as TUoS). This is a charge levied upon the supplier and passed down to a consumer based on their consumer demand at each of the 3 triad periods which highlight the 3 highest periods of peak UK demand between November – February.

For those who have seen our January 2016 market considerations document it was noted that for our sample client infrastructure charges accounted for 16.52% of the overall electricity charge and this is forecast to remain static as a percentage of the overall bill to 2020 (due to increases in other charges and levies) even though we do see increases in the overall cost of infrastructure charges to consumers through to 2020.

There are various methods to mitigate the financial risk through demand management, load reduction, energy efficiency and improved building management. The charts herein represent our analysis on the April-2016 forecast increase for a sample Beond client – noting that especially for DUoS the overall percentage increase will depend on how energy is consumed in the 3 within-day tariff periods.

Beond Services

Beond are a privately owned specialist energy market consultancy – offering innovative and bespoke services to a wide range of energy and carbon consumers. Our business is built on offering tailored energy management and purchasing solutions, supported by our proprietary software and managed by our dedicated team of experts.

Our 5th generation eAuction software platform delivers significant results to our clients:

‒      Averaging 7.67% spread on all tenders, with an average of 7 competing suppliers with 9 bids – our maximum participation in 2015 was 27 separate offers for 1 client.

‒      Our market analysis and key insights into market risks and opportunities alongside our client partnership model helps to deliver significantly improved value over and above the traditional procurement consultancy approach.

‒      A recent client study in 2015 identified a zero cost option to reduce DUoS charges by 60% – netting off future increases in the regulatory cost increases to 2020.

 

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