In rural areas of northern Scotland, the costs of building/maintaining the local electricity grid (Distribution System) would be too high for people living there to pay for, so some of these costs are spread across all end users in GB. The tariffs are published annually and AAHEDC was an embedded benefit prior to 1 April 2023.

The BM is the primary tool of NESO to balance supply and demand whereby generators bid in to either generate or to turn down their generation. Generators are paid for their actions.

BSUoS covers day to day operation of the Transmission System and is the cost of all the actions taken by NESO to balance the system in every half hour i.e. to make sure that generation on the grid matches demand and is not too high or too low. Most of these charges are the revenues generators make through the BM.

From April 2024, only final demand end users (and not generators) are now charged for BSUoS.

CCL is an environmental tax administered by HMRC on energy used by businesses in the UK to encourage the reduction of energy usage. The tax rate for each electricity year is published in the annual budget. Exemptions are available for certain industries and legal proof of any exemptions needs to be passed to the energy supplier for it not to be charged.

Since 2015, the CfD has been the main subsidy for renewable generation in GB which all end users pay for via their electricity bills. In times of high wholesale electricity prices the CfD is a benefit to end users as generators pay back when electricity prices are above their CfD strike price but when electricity prices are below the strike price, it is a cost to electricity consumers.

With increased intermittent renewable generation on the grid, from 2015 the Capacity Market has operated to preserve security of energy supply. In the CM, generators and demand side response (DSR) can bid into an auction and be awarded contracts for being available to generate (or turn off in the case of DSR) in the peak hours of demand every winter. The charges for these services are passed through to end users through the electricity bill.

The DC regularly (usually daily for Half Hourly meters) retrieves the volume data from a Meter Point Administration Number (MPAN) and passes it to both the supplier and the DA. The DA then performs various industry prescribed aggregations and submits the data to central services where it is used in balancing and settlement. Whilst these are two separate roles, they are in practice normally performed by a single company.

The Distribution System is the local electricity network and operates at lower voltages to the Transmission System. There are 14 local Distribution Systems in GB, each run by their own DNO and most sites connect to the Distribution System. A good analogy is to think of the Distribution System as like “A” and “B” roads and the Transmission System as motorways.

There are fourteen DNOs which operate each Distribution Network across the country. The first two digits of each MPAN denote which DNO a site is connected to.

The Distribution Use of System charges are the charges for power consumed or generated on the distribution system with charges governed under the DCUSA (Distribution Connection and Use of System Agreement) and the calculation governed by the CDCM (Common Distribution Charges Methodology). Grid connection type and time of energy usage will determine the charges – peak times of energy usage are called the red band and using electricity in these times incurs a higher fee. Fees are made up of a per MPAN fee, a per capacity charge and a per MWh fee.

Elexon manage the main code under which the electricity market operates, the Balancing and Settlement Code (BSC). Elexon Collateral is effectively credit cover paid in advance to cover the debt for the Imbalance (see below). Elexon Collateral must be maintained at a minimum of 120% of the unsettled Imbalance.

The electricity year runs from 1 April to 31 March each year and this is why the tariffs of many charges change every 1 April.

The FiT is the subsidy paid to small renewable electricity generators (sub 5MW) and is paid for by electricity consumers. EPG receives a quarterly charge from Ofgem with an annual levelisation occurring in the spring which reconciles corrections for the FiT scheme over the previous year.

Final Demand refers to electricity consumption by end users, excluding electricity consumed in the process of generation and transmission or distribution losses. Levies like the RO and CfD are only paid for by end consumers and so those exempt do not pay this charges.

Imbalance covers the charges for energy consumed or generated which does not match the electricity trades done in advance. If not enough or too much electricity has been bought or sold, then the System Imbalance Price (SIP) is applied to these MWh in excess or deficit. SIP is published retrospectively by NESO for each half hour of the year. Where a customer is on a spill contract and there is no forward hedging, this is the sole energy price applied. 

This is the 275kV and 400kV electricity grid which moves large amounts of power around the country. This is like the motorways of the electricity system and is the part of the grid both large end users and large generators connect to.

Former names include National Grid or the Electricity System Operator (ESO), but from October 2024 NESO is the new name of the operator of the Transmission System.

Imbalance & BSUoS are subject to change over time. This is due to the industry replacing near delivery point estimated consumption data with actual consumption data and making corrections. The data can be changed up to 292 days after the initial date.

The RO was the subsidy scheme for large scale renewable generation from 2002 until 2017. Renewable assets were awarded twenty-year subsidy contracts, so the cost passed through on end users electricity bills is falling each year as these subsidies come to an end.

From 2022 to 2015, large renewable generators were subsidised through the Renewables Obligation. The annual cost per MWh of electricity consumed is published by Ofgem as the RO Buy-out and this cost is passed onto customers.

RCRC is the mechanism in which cash short fall or excess generated by the imbalance process is redistributed proportionately by volume. RCRC is inherently a small figure and impossible to predict. RCRC can be a charge or a benefit.

TNUoS recovers the cost of developing, installing and maintaining the National Electricity Transmission System. TNUoS has undergone significant reform and since April 2024 is made up of two charges for consumers, both of which are published in advance with the tariff fluctuating depending on location and connection type.