Insights / Falling TNUoS charges ease distribution cost rises

Falling transmission charges to soften distribution cost increases in April

From April 2024, final transmission network charges will limit – for many – the rise in network costs driven by distribution charges.

Falling TNUoS charges soften distribution cost increases

On 31 January, National Grid Electricity System Operator (NGESO) published Transmission Network Use of System (TNUoS) charges for the charging year commencing April 2024. Its figures revealed that annual TNUoS costs are set to fall by £5.36/year for the average customer compared to current rates. However, substantial increases in Distribution Use of System (DUoS) charges – that the Distribution Network Operators (DNOs) levy – will mean combined network charges are set to rise for many.

TNUoS changes

We’ve summarised the high-level changes to TNUoS below:

  • The fixed component is dropping up to 15%, but some Extra High Voltage (EHV) connected sites and Low Voltage no Maximum Import Capacity (MIC) Band 1 customers will feel increases.
  • A locational “triad” and non-half-hourly (NHH) peak charge applies for more southerly regions. While most regions expect to see an increase in these charges, the Midlands and South Wales will see a marked drop.
  • TNUoS movements will depend on residual banding, location, and triad consumption levels.

We expect overall year-on-year savings of around £285/year for a typical Residual Band 2 Low Voltage connected site-specific user* (RB2 LVSS). However, this will vary depending on location and triad usage. The smallest year-on-year savings are likely to be in the Southern region, with the greatest in South Wales.

The recovery of lower revenues from demand users this year compared to last is driving the reduction in fixed charges. The target revenue is £3.13bn in 2024, compared to £3.47bn in 2023. Lower revenues result in lower residual charges applied to users, influencing the fixed charge that users face. NGESO states it’s taken account of the latest distribution site count forecast, and this is influencing the residual tariffs that some user types face. This causes tariff movements for some user types to deviate away from the broader trend. Changes to the charging base have also influenced the HH and NHH demand tariffs, alongside changes to demand revenue recovery.

Falling TNUoS charges soften distribution cost increases - Figure 1

Overall movements in network costs

DUoS costs are set to rise for many users between 2023 and 2024. Having analysed the data for the typical RB2 LVSS customer, we’ve found DUoS costs could go up by as much as 40% or more in some regions. These include South Wales, London, Southern, and Yorkshire.

As DUoS costs are typically a much larger proportion of the bill for most customers, the increase in DUoS has tended to outweigh the decrease in TNUoS for the year.

However, Balancing Services Use of System (BSUoS) tariffs for April-September 2024 – the BSUoS tariff 3 – are set to fall from £14.03/MWh to £7.63/MWh. This will have a substantial impact on overall network costs for the first half of the year, especially for sites with higher load factors. Incorporating this into our year-on-year movement for a typical RB2 LVSS user reveals a much more variable picture. However, the NGESO BSUoS tariff 4 (from October 2024) is set to rise again to £12.17/MWh.

Remember, due to the different types of charges, the exact impact of the network charge changes in 2024 will depend on your portfolio.

*We used EMEB ARP LVSS Band 2 average consumption under each time band and import capacity for 2025-26 to determine the user.

Related articles