Third party charges

On your electricity invoice, you'll see a section labelled 'other charges'. This includes any elements of your contract that are 'passed through'. A 'pass through' charge is one that's levied by a third party (eg the Government).

Third party charges are the costs to cover distribution network operator costs and meet their obligations for renewables. When you agree a contract you can choose to have some third party charges passed through on your invoice. If you choose pass through, these will be itemised separately under the ‘other charges’ on your invoice.

Charges that can be passed through are :

• Renewables Obligation (RO) charge

• Feed in Tariff (FiT) charge

• EMR Contracts for Difference (CfD) payments

• EMR Capacity Market (CM) charges

• Distribution Use of System (DUoS)

• Balancing Services Use of System (BSUoS)

• Transmission Network Use of System (TNUoS)

Below is an explanation of what each of the ‘pass through’ third party costs is.

The Renewables Obligation

Introduced by the Government to support large-scale renewable electricity generation in the UK.

Through the Renewables Obligation (RO), all licensed electricity suppliers like us are obliged to source a growing proportion of the electricity we supply from renewable sources.

To show we’re meeting our obligation, suppliers have to buy a certain number of Renewables Obligation Certificates (ROCs), issued to accredited renewable generators, and present them to Ofgem. If a supplier doesn’t have enough ROCs, they have to pay into the buy-out fund to cover the cost of the shortfall.

The RO level is set by the Department of Business, Energy and Industrial Strategy (BEIS) each year, including how many ROCs we need to present for each MWh we supply. The buy-out price is set by Ofgem and is adjusted in line with the Retail Price Index every year. Together, these two elements make up the RO charge.

What can I do to lower the charge?

Your RO cost is based on the energy you use as well as the obligation level and buy-out price, so you could lower the cost by using less electricity.

The Feed-in Tariff

Introduced by the Government to support small-scale renewable electricity generation.

The Government launched the Feed-in Tariff (FiT) to encourage homes and businesses to generate their own renewable, low carbon electricity.

Most small-scale renewable generation technologies qualify for the scheme, including: solar photovoltaic (PV) panels; wind turbines; hydroelectricity; anaerobic digesters; micro combined heat and power (micro-CHP).

The scheme pays FiT eligible generators for every kWh of electricity produced and for any electricity exported to the grid, as long as they’re registered with Ofgem through the Microgeneration Certification Scheme (MCS). All energy suppliers pay towards the FiT fund, based on their share of the energy supply market. Ofgem administers the scheme with key decisions being made by the Department of Business, Energy and Industrial Strategy (BEIS).

What can I do to lower the charge?

Your FiT cost is based on the energy you use as well as the applied FiT rates, so you could lower the cost by using less electricity.
 

Electricity Market Reform

Contracts for Difference

The Contracts for Difference (CfD) scheme supports, incentivises and pays low-carbon generators to develop new projects.

The scheme ensures generators receive a fixed price for low carbon generation providing greater certainty to those investing in these new technologies.

Low carbon generators can bid into an auction to secure a CfD contract that guarantees them a price for their power. .  This is known as the strike price.

When a generator sells its power into the wholesale market this is known as the market reference price. They will then receive a difference payment to meet their agreed strike price or if their strike price is below  the market reference price, they pay back.
It is these costs for difference payments to generators and the  industry’s operational costs of managing the scheme that are included in your invoice.

CfD is managed by the Low Carbon Contracts Company (LCCC)

Capacity Market

The Capacity Market (CM) is part of the government's Electricity Market Reform package.  It was set up to make sure there is enough reliable energy available to meet the country’s demands. To encourage investment in new generation projects and technologies, and to help existing means of generation to stay open, capacity is procured in advance through a competitive auction.

 CM charges are calculated based on consumption during winter peak periods (Monday to Friday, 16:00-19:00, November to February), so the impact will be dependent on your consumption profile.

CM is managed by the Electricity Settlements Company.

What can I do to lower my charge?

Your CM and CfDcharge is legislation passed by Parliament and affects all electricity users. However you could lower the charge by using less electricity.

Distribution Use of System

The cost of operating and maintaining the regional electricity network.

Electricity is distributed around the UK by Distribution Network Operators (DNOs), licensed by Ofgem. They own and run the distribution network of cables that carry electricity from the national transmission network (owned and managed by National Grid) to homes and businesses. DNOs don’t sell electricity, they only distribute it.

There are six licensed DNOs in mainland UK at the moment – Electricity North West, Northern Powergrid, Scottish and Southern Energy, Scottish Power, UK Power Networks and Western Power Distribution. There are also a number of independent operators (IDNOs) who deal mainly with specialist commercial developments.

The DNOs are regional monopolies, so Ofgem set price controls to manage the cost of electricity distribution to customers.

In 2015 Ofgem introduced a new performance based price control model for DNOs that is designed to drive the innovation needed to tackle the challenges in the growth of renewable generation and which will run from 2015 to 2023. DNOs have the same cost structure however the cost of running each network differs so DUoS costs will vary by region.

What can I do to lower the charge?

Your DUoS charge is based on the energy you use, as well as the published DUoS rates, so you could lower the charge by using less electricity, especially at winter peak times.

Balancing Services Use of System

The cost of balancing supply and demand across the national transmission network.

National Grid takes actions to ensure the transmission network remains functional on a day to day basis. These actions are wide ranging and often involve payments to third parties such as generators. For example, when the system can’t transmit the power generated at a particular location to where there’s a demand for it, National Grid will reconfigure the system. They may increase or lower the amount of electricity being supplied to the system at different locations. The costs incurred are known as constraint costs.  Along with other costs incurred, they are passed on equally to generators and suppliers as the Balancing Services Use of System (BSUoS) charge.

What can I do to lower the charge?

Your BSUoS charge is based on the energy you use, as well as the published BSUoS rates, so you could lower the charge by using less electricity.

Transmission Network Use of System

The cost of installing and maintaining the transmission system

Transmission Network Use of System (TNUoS) charges recover the cost of installing and maintaining the transmission system in England, Wales, Scotland and off-shore.

Providing a reliable source of electricity needs a reliable transmission network, to connect power stations and off-shore electricity generation facilities to distribution networks across the country.

National Grid Electricity Transmission (NGET) owns the transmission network in England and Wales whilst Scottish Power Transmission and Scottish Hydro Electric Transmission own it in Scotland. There are also several off-shore networks owned by various counterparties. 

NGET recoup the costs of running and maintaining the transmission system on behalf of all companies, by charging users of the system; the costs are split between generators and suppliers of electricity.

Tariffs are set each year by NGET and vary geographically and by supply type (half hourly/non-half hourly).. National Grid divides the UK into regional charge zones and in general demand tariffs are higher for consumers in the south and lower for consumers in the north. For half-hourly metered customers the charges are applied to their average demand during the Triads (the three half-hour settlement periods with the highest system demand.)

What can I do to lower the charge?

If you choose to pass through the charge, we can advise you when we believe a Triad is imminent, so you can use less electricity during that period.

Contact us to find out more

Please get in touch with your Account Manager or call 02476 424242 (select option 3 calls to this number will be charged at a local rate).
We’re here from 8.30am - 5pm Monday to Thursday and 8.30am - 4pm on Friday.



The information reflects the views and opinions of E.ON on the 31 May 2017. The Information is intended as a guide only and nothing contained within this webpage is to be taken, or relied upon, as advice.  E.ON makes no warranties, representations or undertakings about any of the Information (including, without limitation, any as to its quality, accuracy, completeness or fitness for any particular purpose) and E.ON accepts no liability whatsoever for any action or omission taken by you in relation to the Information. Any reliance you place on the Information is solely at your own risk.  This information is the property of E.ON and you may not copy, modify, publish, repost or distribute it. © E.ON 2017