Ofgem floats options for network charging, moots making firms pay even for on-site generation


Ofgem’s has floated plans to make grid access rights flexible and capacity tradable as part of its major review of network charges.

The regulator said it is also looking at basing network charges on gross demand – not net. That would mean network charges for businesses even where they are using onsite generation.

While Ofgem will consult before taking any plans forward, it said any new arrangements will be in place by 2020/21.

Ofgem is looking at both retrospective (residual) network charging, which helps pay for the ‘sunk’ network costs, as well as how to charge for future access and use of the system.

The targeted charging review update looks at who should pay residual or ‘sunk’ network charges. Ofgem believes there are ‘considerable benefits to levying residual charges on final demand, compared to generation’ and the regulator sets out ways that those charges could be applied.

It appears to rule out net charging but will give consideration to fixed charging based on profile class. The regulator says while it would not apply gross charging to households, it sees merit in applying that approach to businesses.

Meanwhile, on forward looking costs, specifically connections, the regulator is looking at flexible arrangements in order to sweat existing capacity.

‘Those that are happy to have their output curtailed at times of system stress could be offered cheaper access. Network capacity could also be traded, auctioned or transferred between users,” summarised Andrew Wright, Ofgem’s senior partner, electricity systems, in a blog post.

“This could lower the overall costs to all customers of the energy system,” he suggested.

See the residual charging arrangements review note here, and the network access and forward looking charges here.

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