NESO forecasts 2027 BSUoS costs to hit new records

The draft tariff 9 (summer 2027) is £21.67/MWh, £7.93/MWh (58%) greater than tariff 7 (summer 2026). Similarly, the draft tariff 10 (winter 2027-28) is £18.42/MWh, £5.93/MWh (48%) greater than tariff 8 (winter 2026-27). The record fixed tariff forecasts are predominantly caused by a significant under-recovery in the costs of balancing the system this year.

The final tariffs for 2027-28 will be published in December 2026.

Under-recovery background

From 2026, NESO have set BSUoS tariffs on a seasonal basis. Each December, NESO publishes the fixed BSUoS tariffs for each season based on forecasts of its costs to manage the electricity system. It has a £300m Working Capital Fund (WCF) to support any within-year under-recovery.

However, the conflict in the Middle East, which commenced on 28 February, has significantly impacted gas and power prices. In turn, this impacts the costs of managing the GB electricity system. This means that by 31 March 2027, NESO’s forecasting an under-recovery of BSUoS costs of £1.06bn. Instead of resetting the tariffs this year, NESO plans to recover the funds from fixed tariff 9 and 10 in 2027-28. NESO calculates that this accounts for 20% of the tariff 9 and 10 forecasts, and therefore drives much of the significant increase in forecast costs.

Other factors

NESO’s forecast cost of balancing the system rises 26% in tariff 9 and 18% in tariff 10, compared to tariffs 7 and 8 respectively. This is predominantly due to constraints costs, which account for approximately 71% of the balancing cost forecast in draft tariff 9 and 68% in draft tariff 10. They reflect higher forecast wholesale prices over the 2027-28 period. But please note, NESO developed its forecast based on forward prices between 1-5 September, and wholesale power prices for delivery over the period have increased around 7% since then (as of 28 September). The final tariffs will depend on the forward curve in December.

NESO forecasts that final demand will increase by 1.7% between tariffs 7 and 9, and by 1.4% between tariffs 8 and 10. This acts as a small offset to the broader increase in costs.

Next steps

NESO will issue final tariffs for tariff 9 and 10 in December.

Disclaimer

We’ve used all reasonable efforts to ensure that the content in this article is accurate, current, and complete at the date of publication. However, we make no express or implied representations or warranties regarding its accuracy, currency or completeness. We cannot accept any responsibility (to the extent permitted by law) for any loss arising directly or indirectly from the use of any content in this article, or any action taken in relying upon it.