Funds To Be Recovered During Following Year

As you will be aware from our previous blog in early April, National Grid Electricity System Operator (NGESO) previously notified stakeholders of an under-recovery of c£44m of BSUoS costs that were incurred in FY20.

In the blog we highlighted that the bulk of the under-recovery (c£34m) was related to NGESO’s trading activities and, at the time of writing, the recovery method for this portion of the money was under deliberation. NGESO proposed that the trading costs should be recovered via the RF reconciliation run for the FY20 charging year (the same year as the error occurred). However, EDF Energy raised a CUSC modification, CMP373, proposing that the costs be spread across the following year, FY21 (as per the ALOMCP costs). 

Ofgem have now approved EDF Energy’s modification. Therefore, it has been confirmed that the costs will be recovered in the SF reconciliation run on a volume weighted basis during the settlement periods between 1st October 2021 and 31st March 2022 (an equivalent period of time to that of the initial under recovery).

How Does This Impact UK Businesses?

A recap from our last blog….

For the vast majority of UK electricity consumers, the error won’t be noticeable. Energy suppliers may choose to slightly increase their prices for FY21 to accommodate for the additional BSUoS cost recovery but when you consider that total BSUoS costs for FY20 will be of the order of £2bn, the £43m equates to c2%, so not a huge difference. 

However, if your business had a ‘pass-through’ type electricity contract in place during FY20/21, you are more likely to feel a small ripple. We can take a look at the impact for the two errors.

  • Electricity consumers with pass-through contracts in FY20 stand to benefit by a small amount as the c£34m in costs will now be spread across all participants in FY21.
  • Conversely, embedded generators with pass-through contracts stand to lose out as they not only miss their share of the BSUoS charges (embedded generators are treated as negative consumers for BSUoS charging and thus typically receive BSUoS as an embedded benefit), but also, from FY21, they are no longer eligible for BSUoS benefits following a code change.

Improvements To Come

In announcing the details, NGESO also took the opportunity to inform stakeholders that as a result of their further investigations into the root cause they have committed to:

  • Commission PwC to help to improve their processes and to enhance the overall BSUoS charging control environment. 
  • Present key findings of PwC’s work to the industry via the future Transmission Charging Methodology Forum (TCMF).
We look forward to hearing about PWC’s suggestions.