Further volatility in electricity delivery charges on the way

Further volatility in electricity delivery charges on the way

Already, 2019 looks set to result in a further increase in electricity delivery charges, with the indicative distribution and forecast transmission charges now published.

An increase to electricity bills will come in to force next month under DCP 228, which aims to revise how DUoS (Distribution Use of System) charges are calculated, so that they accurately reflect the costs incurred by network operators during peak and non-peak periods.

Now, 2019 is likely to bring a further rise in these charges too. The scale of increase will vary significantly across the UK, and 2019 will also see a continuation of the rebalancing in time-of-day charges. This is making it increasingly important to monitor and manage your electricity usage.

The indicative DUoS charges for 2019 have been released by all the Distribution Companies. Meanwhile, the corresponding forecast Transmission Network Use of System (TNUoS) charges for the same period have also been published.

What’s the impact to your energy bill?

On average, DUoS charges are increasing 9%, while TNUoS is rising closer to 11%.

Smaller domestic consumers – Profile 1 customer types – are likely to see the largest overall increase in delivery charges, estimated at around 10%. Larger Half-Hourly (HH) businesses (Profile 00) are forecast to see a 4-6% increase.

While there was a small decline in charges around the start of the current price controls on distribution and transmission companies, these latest charges represent further increase in consumer costs.

Non-commodity costs (NCCs) are a growing proportion of overall energy costs, on course to account for over half of your electricity bill during this decade. With no way to reduce these unit charges, consumers will have to become even more careful about how they use energy in order to cut overall electricity costs.

Delivery charges per profile type

Indeed, recent changes in DUoS charges have continued into 2019, which is increasing the pressure for consumers to be even more aware of when they use electricity in order to control their costs. DCP 228, which will change the rules governing distribution charges, allows for a rebalancing of time-of-day charges. In most cases, this means that charges for using electricity during the afternoon are being cut. However, those for the rest of the day are on the rise.

This is most evident in the HH, Profile 00 market, where DUoS unit charges are split between Red, Amber, and Green Bands. Red Band charges are those which tend to cover usage between 4pm and 7 pm, and are significantly higher than both the Green Band, covering generally low usage overnight periods, and the Amber Band, which covers other time periods.

Red Amber Green Band charges

How high could costs soar?

In 2019, in most regions, Red, Amber and Green unit charges will increase. However, the pace of the increase is generally much higher in Amber and Green charges. Indeed, in the regions where Red charges are marginally weaker, the corresponding charges for the other time periods are rising sharply.

On average, Red Band charges are expected to rise 2-3% in 2019, while Amber charges are indicated to be increasing 9-11%, and Green Band charges up 11-12%.

While these changes are narrowing the difference between the different time periods, the costs for the Red Band are still much more than the other two regions combined. There is a still a huge incentive to avoid or reduce usage during the Red Band time period. This would also help mitigate transmission charges, as well as the increasing costs for the Capacity Market, which many suppliers will be charging based on winter consumption during the general Red Band time period.

What does this mean to consumers?

2019 will bring an increase in DUoS and TNUoS charges for most consumers. Furthermore, the indicative charges point to a continuation of the rebalancing between the different time-of-day charges. However, there remains a very strong incentive for consumers to try and avoid using energy during the peak demand period of between 4pm and 7pm. This will help control charges and mitigate the impact of costs which are non-negotiable.

Webinar – the rise of energy taxes

To find out more about how you can cut and control your rising non-commodity costs, that include DUoS and TNUoS charges, catch up on our recent webinar by downloading the recording here.

Ross Moffat

Posted by on Thursday, the 15. March at 9.00

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.