Ofgem issues call for evidence on TNUoS reform

United Kingdom

Introduction

On 1 October 2021 Ofgem published a call for evidence in relation to Transmission Network Use of System (“TNUoS”) charges levied on users of transmission networks in Great Britain (the “Call for Evidence”).

The Call for Evidence follows the recent Access and Forward-Looking Charges Consultation, which referred to the need for a broader review of transmission charging arrangements in the context of Ofgem’s wider push for flexibility throughout the energy system, as well as Ofgem’s Targeted Charging Review (see our commentary on the Access and Forward-Looking Charges Consultation here and on the Targeted Charging Review here).

Focus of the Call for Evidence

The Call for Evidence seeks stakeholder views in order to inform Ofgem’s approach in relation to the following:

  • The extent to which a broader review of TNUoS would be beneficial;

  • Priority areas for reform of TNUoS;

  • How a review of TNUoS might be taken forward, for example through a significant code review (“SCR”), open governance, or another hybrid approach; and

  • The timescales for any review and any subsequent modifications to current arrangements.

Ofgem’s current thinking in relation to the TNUoS model

Ofgem has set out its current view on the TNUoS model as follows:

  • In the context of increased flexibility, “non-wires” solutions to network issues and greater deployment of renewable generation, the purpose and design of TNUoS charges may need to change substantially from its current form;

  • TNUoS charges should take into account Ofgem’s work in full chain flexibility as well as net-zero, such that TNUoS charges support changes in consumer behaviour that will ultimately lead to reduced network investment costs in the long term;

  • Parties should face charges which reflect the effect that their commercial decisions have on the network;

  • Reducing complexity in TNUoS charges could improve competition; and

  • Network charges may have a significant impact on how net-zero is delivered. The TNUoS regime should be non-discriminatory and continue to recognise the relative value, benefits and disbenefits of the different technologies that are connected to the transmission network. 

The Call for Evidence seeks to encourage views from stakeholders on all aspects of the current TNUoS charging model, but has set out the following as indicative areas of interest:

  • Available capacity of network assets;

  • Additional demand backgrounds could be incorporated into the model used to calculate TNUoS charges;

  • Alternatives to the peak/year-round generation background and also to the shared/not shared elements of the tariff;

  • Whether multipliers could be used within the locational charging methodology in order to ensure they remain cost-reflective;

  • Changes to the “reference node”;

  • Charges relating to large-scale and long-duration energy storage;

  • Arrangements for distributed generators;

  • Offshore connections; and

  • The strength and accuracy of technical data inputs.

Commentary and next steps

As noted in the Call for Evidence, the charging methodology underpinning TNUoS is widely perceived by the industry as unduly complicated with charges often being unpredictable and varying significantly by connection point location. As a result, the current TNUoS charging regime can be both difficult to manage and represent a barrier to investment needed for GB to achieve net-zero. The Call for Evidence has therefore been well received by the industry as an opportunity to identify potential solutions to challenges with the current model.

Following stakeholder feedback, if Ofgem deems that reform is required, a formal consultation will be issued on the subject. The Call for Evidence is open until 12 November 2021.