Network costs to increase for businesses generating own energy

Businesses that generate their own power may be faced with higher electricity network charges under proposed reforms announced by Ofgem today.

The regulator is consulting on changes to ‘residual’ charges, which are currently based on how much electricity consumers take from the grid. Users who generate electricity themselves on site can avoid a lot of these charges even though they use the grid as back-up. As a result, consumers that take all their electricity from the grid, including households which have not installed solar panels or other renewables, pay more of these charges.

Ofgem’s proposed charging reforms would introduce fixed residual charges for all households and businesses, rather than charges based on the amount of electricity they take from the grid. They would be broadly similar to fixed telephone line rental arrangements.

It means that homes and businesses that generate electricity at home or on-site, could pay more. Ofgem is asking for views on whether the changes should be implemented in 2021, or phased in between 2021 and 2023.

The regulator is also proposing to remove some of the differences in the way that smaller generators connected to the distribution network are charged compared to larger generators. It says that removing some of these ‘embedded benefits’ will lead to significant savings for consumers.

Ofgem says that any policy developments in relation to the Capacity Market, which was suspended this month, will be considered in its decision on the reforms.

The consultation deadline is 4th Feb 2019. You can share your views with Ofgem here; we will keep you updated on the consultation outcome.