Your electricity tariff consists of more than simply the cost of wholesale energy. More than half of the tariff is formed of government levies, distribution costs and the operational costs of maintaining and balancing the system. One such cost is BSUoS, and this is a cost that has seen large variations in recent months.
What is BSUoS?
Balancing Services Use of System charges (BSUoS) are based on the cost incurred by National Grid ESO in balancing the system; chiefly the administrative and operational costs of the balancing mechanism, investment in future projects, cash flow from incentive schemes and contract costs. These costs are passed on to suppliers for payment. One of the more complex cost components, with charges calculated on a half hourly granularity and changeable on settlement runs, it has typically hovered around 0.25p/kWh for the best part of two years but began increasing sporadically from mid-2019, seemingly plateauing around 0.4p/kWh in 2020.
What has driven the change?
The chief reason behind the sharp and now consistent increase is down to the increased reliance on wind generation in the generation mix. BSUoS is a cost driven by unpredictability as National Grid ESO experiences more issues in its continued balancing of the UK system and the sheer intermittency of wind generation in the mix has nearly doubled these costs. This is a good move for the long-term sustainability of supply but not for system forecasting and balancing.
Has Covid-19 contributed?
The ongoing Covid-19 pandemic has subdued demand for electricity as businesses’ useage decreased and this has certainly caused spikes in BSUoS over the last few months as the impact is spread across less demand. While some of the more extreme pricing and general costs should hopefully decrease from these recent levels when we see some economic recovery, the intermittency of supply still remains and these increased costs were already evident in early-2020 prior to the pandemic.
What changes can we expect in the future?
The view of market analysts is that if anything, the costs could increase in the coming years as more windfarm projects begin development and previous baseline generation volume disappears from the mix, chiefly coal plants but also older gas plants who are feeling the pinch of subsidy-free generation costs. Coupled with a 5-year low in fuel costs, right now is a great time to consider fixing a new, low-rate business energy supply.
If you’re concerned about the recent cost increase and how non-energy costs might change in the future, contact UGP for a 100% fixed, 100% renewable electricity quote on 0800 669 6697.
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