Losses costs explained

The information in this video and article was accurate as of 1 April 2025. We update our TPCs Explained hub every Spring to reflect any changes.

What are losses and how do they work?

Losses occur on the transmission and distribution networks, and there are two main types split across the two network levels:

Technical losses

These are power losses that occur due to the features of electrical conductivity. This includes variable heating losses in flowing power through cables, and the fixed losses associated with transformer energisation.

Non-technical losses

These are driven by actions that are external to the power system. Examples include theft of electricity and unmetered supplies.

Transmission losses

These are the losses applied at the transmission level in GB. This includes equipment operating at over 132kV in England and Wales, and includes the 132kV network in Scotland. Transmission losses are calculated on a regional and seasonal basis.

Distribution losses

These are the losses applied at the 132kV voltage level and below in England and Wales, and anything below the 132kV voltage level in Scotland.

Distribution losses vary within day (with the peak period having the highest losses) and have a seasonal element too (typically, with higher losses in the winter).

How much of your energy bill do losses account for?

Losses vary significantly by location and connection voltage, with lower voltage connections facing the highest per unit losses. For 2025, the forecast figure as a proportion of the bill for a Low Voltage Site Specific (or LVSS) customer is 4%.

The losses are applied to wholesale charges and need to be used to uplift some other other third party costs depending on how they are charged.

How are losses recovered?

Suppliers forecast losses based on Loss Adjustment Factors (LAFs) provided by the network operators, where available. Suppliers buy sufficient power to account for the losses to ensure customers receive the correct amount of usable energy. This extra cost is passed on to customers.

Will you know about losses costs in advance?

Some elements are known in advance, such as distribution losses, which are published in November, ahead of the April-March charging year in which they will apply.

Seasonal location transmission loss factors are known in advance, however, electricity transmission loss modifiers are only estimated and will vary depending upon actual losses each day.

What drives the losses charge?

The four main drivers for losses are:

• The efficiency of flows on the network
• The average distance that the power needs to flow
• The voltage levels at which flows take place
• The amount of non-technical losses on the network

To learn more about the other TPCs in your energy bill, head to our TPCs explained hub using the button below. Or, to understand more about electricity prices, download our latest bi-annual Electricity Prices Explained guide.

Disclaimer

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