Energy regulator Ofgem has launched a consultation on changes to network charging.

The watchdog believes the current system of network residual charges should be reviewed, as it said it has the potential to distort outcomes and increase charges for some consumers.

Ofgem is now seeking views on whether it should launch a Significant Code Review to consider these issues and are seeking views on the principles that should guide it if it proceeds with a review.

Residual charges largely relate to costs that have already been incurred, such as past investment in underground cables.

Frances Warburton, Ofgem’s Partner for Energy Systems, said:

“If one set of users pay lower residual charges, these costs have to be recovered from somewhere.

“If some network users pay less, it means that others have to pay more towards these charges, and these charges then flow through to customer bills.”

Warburton said it “will not be an easy issue to solve, and many other countries are facing similar challenges”.

Move towards levelling the playing field for storage

Meanwhile, Ofgem has also published proposals to stop energy storage sites being charged twice, for both generation and demand.

The regulated is proposing that storage should be treated as generation when it comes to residual charging.

The watchdog also noted that storage currently pays more than its competitors when it comes to balancing services.

> Download Ofgem's consultation document