Balancing services should be £/MWh and based on final demand – task force

All final demand customers should pay grid balancing charges that are based on a set £/MWh basis, according to the Balancing Services Charges Task Force.

The group, convened by National Grid ESO at Ofgem’s request, has spent two years working out how to better allocate grid balancing charges, which are increasing as the power system decentralises and decarbonises. The more effort required by the ESO to balance supply and demand and system stability, the more it is likely to have to spend.

Balancing Services Use of System Charges (BSUoS) are currently calculated as a flat tariff for all network users. The ESO provides a monthly forecast which energy suppliers use to help manage pricing and recovery.

The Task Force recommends that they should in future be set on a volumetric, or £/MWh basis.

It thinks National Grid ESO should set this charge 14/15 months ahead of time, so that everyone knows what they have to pay. The ESO takes volatility risk. While that creates a risk of over or under recovery of costs by the ESO, it gives suppliers some certainty.

Ofgem will now consider the full report. The Task Force said the regulator should give two years’ notice ahead of agreeing changes to the charging methodology.

Details here.

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