On Monday Ofgem provided an update on its targeted charging review. But, what does this actually mean?

Ofgem have published two separate documents alongside a blog outlining potential charges to the way the regulator recovers both forward-looking and residual (historic) network charges.

Currently, Ofgem bases residual network charge recovery on a household’s net consumption. This means that customers with rooftop solar PV or battery storage reduce their reliance on the grid and therefore pay less. The cost is therefore passed on to those who solely use the grid, in order for the grid to be maintained.

Andrew Wright, the author of the blog, wrote “We want to make sure that all users pay a fair share of the costs even if they are only using the networks when their onsite generation is not producing electricity.”

The regulator has put forward four separate approaches for how these charges should be recovered from final demand:

  1. Volumetric Basis – Based on the units of electricity used in kWh. This is Ofgem’s current method of recovery of residual network charges of the distribution system.
  2. Capacity Basis – Separated into ex ante capacity and ex post capacity demand charges. This is based on either the user’s agreed or connected capacity or peak system use.
  3. Fixed Charges – Customers are separated into user profile classes, with each class allocated a fixed charge determined by Ofgem to share residual network costs.
  4. Hybrid Approach

The regulator has elected to bring forward fixed, ex ante capacity demand and ex post capacity demand charges for further assessment.

So what is ex ante and ex post capacity demand?

Ex Ante – Based on the user’s agreed or connected capacity, with consumers possibly incentivised to declare their capacity needs. Ofgem have said that any forecasts issued could be used to support planned of network demand.

Ex Post –  Peak use would be measured, and a charge based on the average of a set of number of each user’s highest usage half-hours over a defined period.

Ofgem’s stated aim is to progress rapidly through the process, hold two rounds of stakeholder events throughout the rest of the year and release a consultation on its announced minded-to-decision by next summer.

Over the next year we will find out exactly how these changes will affect you and your electricity bills.

Two stakeholder sessions have been scheduled, one in Glasgow on 15th November and another in London on 30th November. Ofgem can be contacted by those interested in attending at: TCR@ofgem.gov.uk


With thanks to Solar Power Portal: https://www.solarpowerportal.co.uk/news/solar_households_could_be_hit_by_radical_changes_to_network_costs