Introducing a smarter approach to network charging

25 November 2010

Introducing a smarter approach to network charging

Getting the signals right!

Members of Energy Networks Association (ENA) are launching a consultation next month to look at a more effective, fair and long-term approach to charging large business customers for the use of their networks. This will also have the effect of encouraging greater penetration of new renewable generation onto the right parts of the network and will pave the way for a smarter grid.

Following the introduction of a common distribution charging methodology for the bulk of customers in April this year, the Distribution Network Operators (DNOs) have turned their attention to customers connected at the top levels of their networks.

It comes as part of an ongoing project with Ofgem that, since 2005, has been working to establish a common charging methodology for electricity distribution. This has been implemented for the majority of customers and the new consultation will consider those business customers requiring an Extra High Voltage supply (over 22kV), or a High Voltage supply metered at the substation. Implementation is currently planned for April 2012.

The distribution network operators want to encourage wide stakeholder participation in this consultation and the workshop that will follow. They will be contacting affected customers on an individual basis. Ofgem too has been clear that network operators must do all that they can to help their customers understand and influence the final stages of development work towards new EHV charging methodologies.

Driving greater efficiency into the network

The aim is to encourage customers to utilise existing network capacity, and avoid prompting network reinforcement. This will be achieved by 'locational' price-signals leading to higher prices for demand and lower prices for generation in areas where network capacity is scarce but lower prices for demand and higher prices for generation in areas where network capacity is plentiful.

A smarter network

Under the new charging methodology, power flow modelling would be used to produce tariff elements that reflect incremental costs; the extent to which individual customers are seen to bring forward, or put off, future investment in the network.

Credits for distributed generation that is seen to offset the need for demand-led network investments would also be calculated. This will therefore help facilitate greater connection of new renewable generation onto the network. It will also encourage a smarter approach to network management as the charging methodology will encourage customers to reduce their costs by reducing their own consumption at times when the distribution system is heavily loaded.

With greater pressure on investment it is vital we look to make best use of the funds available. The draft methodology will seek to balance a purely economic approach with an enduring, fit-for-purpose solution.

A charging methodology that can adapt to future needs and facilitate the introduction of greater generation at distribution level - thereby aiding the move to a lower carbon future - would be a great step forward.

The consultation is being run from December 2010 through to the end of January 2011 and network operators are keen to involve the public in a workshop on 13 January 2011 before feeding back to Ofgem in April 2011. It is anticipated a new common charging methodology will be implemented from April 2012.

Anyone wishing to take part in the consultation and workshop in January 2011 should contact Christine Pearson: [email protected]


Notes to editor

ENA represents the ‘wires and pipes’ transmission and distribution network operators for gas and electricity in the UK and Ireland.

For further information please contact:

Tim Field, Press and Public Affairs Executive
Energy Networks Association
E: [email protected]
T: +44 (0)207 706 5157
M: +44 (0)7725 372 758