What is the Network Charging Compensation Scheme, and what does it mean for EIIs?

Early this year, the government announced the British Industry Supercharger (BIS): a comprehensive set of measures aimed at encouraging competition between Britain and Europe's strategic Energy Intensive Industries (EIIs). In this blog, Amy Tyler, Industry Regulation Manager at SmartestEnergy, discusses the most recent updates following the government's latest consultation, which saw the launch of the Network Charging Compensation (NCC) Scheme.

The NCC Scheme is the final part of the BIS, a package comprised of three key measures addressing the main areas within the UK energy system that contribute to higher electricity costs for EIIs compared to the costs facing comparable European countries.

The three measures are as follows:

  • Increased subsidies under the existing EII Renewable Levy Exemption scheme, from 85% to 100% aid intensity
  • Full exemption from Capacity Market costs
  • The Network Charging Compensation (NCC) Scheme

As we push towards a greener future, these measures are vital in driving decarbonisation, and the British Industry Supercharger is a significant step forward in securing a sustainable future for EIIs.

So what is the Network Charging Compensation (NCC) Scheme and how will it affect Energy Intensive Industries (EIIs)?

The NNC scheme is a proposed compensation mechanism to reduce network costs for Energy Intensive Industries when using the GB electricity grid, such as BSUoS, TNUoS and DUoS costs. The scheme will reduce EII network charges by 60%, however, unlike other recent schemes, the discount will not be applied in real time and will be given as a retrospective rebate from April 2025.

This rebate will be funded by a new industry charge called the EII Support Levy (ESL), which will redistribute costs across other electricity bill payers. Essentially, all non-domestic customers, including EIIs, will pay approximately an additional £1/MWh on their bills. Then, one year after delivery, EIIs will directly receive rebates via the Network Charging Compensation Scheme.

Next steps…

As with other recent EII-related benefits, EIIs will be expected to lead claiming this rebate from the industry themselves, similar to the recent Energy Bill Relief Scheme (EBRS). Elements of this process are yet to be confirmed, and we can expect more information from the government in due course around how they can claim. However, EIIs will be required to provide evidence of the network charges they have incurred on a quarterly basis to define the level of discount they will receive.

Currently, the government's priority for 2023 is the appointment of an administrator for the scheme. Then, further guidance is to be expected in April 2024, and the commencement of both the NCC Scheme and the EII Support Levy is to take place in April 2025.

You can find further information about the latest consultation and its outcomes on the government website here, and at SmartestEnergy, we will continue to communicate any necessary updates to keep you informed and help you navigate the changes in the industry.