Ofgem intends to impose fixed charges on all users of the electricity system and do away with usage based charges.
The regulator is consulting on whether to implement transmission and distribution charging regime change in 2021 or phase it in between 2021 and 2023.
Ofgem also plans to cut embedded benefits further for small generators by 2021 at the latest, including the BSUoS embedded benefit, replacing it with a charge.
It said any proposals would take into account whatever happens to the Capacity Market, which is currently suspended following a legal challenge.
The rule changes will have major implications for companies with onsite generation or who avoid peak costs. They may further undermine business cases for demand-side response or flexibility, though the regulator indicated it is mulling other incentives for businesses that engage in a smarter energy system.
The Association for Decentralised Energy, which represents providers of decentralised energy systems amongst other groups, warned the proposals could damage industrial competitiveness.
Director Tim Rotheray said the rule changes would “lead to businesses walking away from providing flexibility full-stop” and lambasted “nebulous jam tomorrow” promises of future incentives.
Ofgem is trying to find a way to ensure people who don’t avoid network charges do not pick up the tab for those that do and ensure businesses pay for having the security of a national wires system, even if they do not use it all of the time.
Businesses understand the rationale for change, but worry that new means of being rewarded for helping to balance the power system will not be in place when the old ways are removed.
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