Uphill road ahead for energy charges

Our recent webinar on energy prices and non-commodity costs highlighted some steep increases down the line for buyers. Key Account Manager and webinar presenter, Mark Cox, looks at the key areas businesses need to be preparing for.

Although wholesale prices have edged down a little since the start of the year, the long-term picture for business energy bills remains firmly on an upward curve.

One of the biggest charges on bills – Transmission Network Use of System (TNUoS) – is set to see particularly sharp increases next year for some consumers.

In parts of Scotland, increases could be of the order of 60% due to the impact of a lower proportion of thermal generation forecast to be available in the North Scotland distribution zone.

Consumers in England and Wales are also expected to see double-digit growth in costs and our projections for TNUoS charges further out show continued steep rises pretty much across the board.

Buyers need to also start preparing for a major shake-up in the way the cost of transmission losses – the amount of electricity ‘lost’ as it travels along the network – is shared across the industry.

Following the CMA’s investigation into the energy market, zonal transmission losses are being introduced from April 2018 in a bid to more accurately reflect costs and drive a more efficient despatch of generation. The impact on customers will depend on a number of factors including location and size of portfolio.

One non-energy charge which buyers might have hoped would be starting to ease back is the Renewables Obligation (RO). Although the scheme has now closed to new projects, prices are continuing to rise as more capacity comes on stream with higher expected load factors due to technology advances.

Our updated forecast expects the cost to be slightly lower than expected this year but we have raised forecasts further out and we now don’t expect costs to start to reduce until 2023.

Another key issue covered in our webinar was the Energy Intensive Industries (EII) Exemption from the indirect costs of Renewable Obligation (RO) and Small Scale Feed-in Tariff (FiT). This exemption was due to be brought in from April-17 but was delayed and now looks likely to be introduced later this year or next.

Most non-exempt businesses will see an increase in bills to pay for the scheme and we looked in detail at how that might stack up.

Watch the videos below for our latest updates on EII Exemption, the RO and transmission charging*.

Please get in touch if you would like to discuss these or our other forecasts in more detail.




> More information on non-commodity costs


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