By Dave Soper, Commercial Director at SME energy supplier Valda Energy
When the National Energy System Operator (NESO) published its five-year TNUoS forecast in September, the industry response was as we expected. Analysts calculated percentage increases for different site types, consultancies advised clients on budgeting strategies, and legal firms examined the regulatory framework driving the changes.
Much of the industry discussion centred on transmission investment needs, RIIO-ET3 price control determinations, and how locational tariffs would shift across different zones.
But there’s a substantial gap in this conversation. Small and micro-businesses, over 5.7 million of them, representing 99.9% of the UK business population, are almost entirely absent from the debate about network charging reform that will materially increase their standing charges.
From April 2026, Transmission Demand Residual charges will jump from £3.8bn to £7.5bn. For a typical microbusiness customer with 12,500 kWh annual consumption, that’s a £305 increase – 9.4% on their total bill. Their daily standing charge for TNUoS will double from 76p to £1.60.
The problem isn’t just the size of the increase. It’s that these businesses have little-to-no voice in the process that’s driving it.
Large industrial users have procurement teams, energy consultants, and direct relationships with policymakers. They can participate in NESO consultations, negotiate capacity agreements and can even be protected by the Ell scheme.
This might not be the case for small businesses. A salon owner in Swindon or a retailer in Manchester doesn’t have time to decode NESO’s charging methodology documents. They might not be on industry mailing lists and might not know what TDR means until it hits their bill. They sit in a policy blind spot, too small to have industry influence or wide support, yet too commercial to trigger consumer protections.
The timing couldn’t be worse for SMEs
The Federation of Small Business’s Q3 2025 index paints a stark picture. Confidence has plunged to -58 points, down from -44 in Q2. An unprecedented 30% of small firms are bracing for contraction, whether that’s downsizing, selling up, or closing altogether. 6% specifically predict they’ll close within the year – that’s 330,000 potential business closures.
Only 18% of small businesses expect to grow in the next 12 months and over half saw revenues fall in Q3. When asked about barriers to growth, 68% pointed to the domestic economy and 45% to the tax burden.
Energy debt in the SME sector is also rapidly rising. Ofgem’s research found microbusinesses and sole traders most likely to face payment difficulties. Now, we’re about to layer a considerable, fixed cost increase onto businesses already under pressure. And because TNUoS is recovered through standing charges, there’s nothing they can do about it. Installing a smart meter, cutting consumption, or moving to time-of-use tariffs has no impact on this segment of the bill.
Bringing SMEs into the conversation
The transition to net zero requires huge transmission investment, and nobody disputes that. But the current approach concentrates the cost burden on end users through a demand residual that’s ballooning from £3.8bn to £11.75bn by 2030/31. This raises a pressing matter of affordability: we must understand if small businesses can realistically absorb these charges while still investing in growth, decarbonisation, or essential operations.
There are many questions that need to be considered, including: Have we properly assessed the impact on SME cashflow and investment capacity? When small businesses defer equipment upgrades or delay heat pump installations because standing charges are eating into their margins, does that help or hinder decarbonisation? Are there alternative cost recovery mechanisms that spread the burden more equitably, through renewable subsidy frameworks, carbon pricing revenues, or a phased approach that smooths both the immediate step-up in April 2026 and the ongoing year-on-year increases over the next five years?
The industry must recognise that 5.7 million businesses represent a legitimate stakeholder group in network charging reform. Their exclusion from policy discussions isn’t just unfair, it can create concerning policy outcomes.
As an SME energy supplier, we see the impact every day. We’re the ones who’ll handle the payment difficulties, the confusion, and the complaints when bills jump 8-10% in April. We know what happens when policy changes land on small businesses with little warning and no agency to respond.
That’s why Valda Energy has written to Ed Miliband and other key stakeholders at the Department for Energy Security and Net Zero (DESNZ) asking for urgent consideration of the SME impact before these TNUoS charges take effect. Not to block necessary investment, but to ask the UK Government to consider options like alternative cost recovery and better alignment with renewable policies to protect small businesses and economic growth.
The final tariffs will be published on the 31st of January 2026. If we’re going to have a proper conversation about the SME impact of TNUoS, it needs to happen now because small and micro-businesses shouldn’t be an afterthought in energy policy. They’re the backbone of the UK economy and they deserve a seat at the table.
