What are Transmission Use of System (TNUoS) charges and why do they exist?
Transmission Network Use of System (TNUoS) charges are network charges which recover the costs of installing and maintaining the transmission system. TNUoS charges specifically apply to the transmission network, which moves electricity long distance, from generators to local distribution networks. Comparatively, Distribution Use of System (DUoS) charges work to upgrade and maintain local distribution networks.
TNUoS charges apply to all suppliers and generators, and the cost is then passed onto consumers. The main TNUoS charge is charged on a daily basis, based on a business’s Targeted Charging Review (TCR) banding. This banding is based on their agreed supply capacity (if there has been one agreed), or their Estimated Annual Consumption (EAC) if an agreed supply capacity is not in place. These charges help to support the energy transition by facilitating the usage of renewable energy. As the number of renewables on the grid is likely to continue to increase in the future, these charges will also be crucial in ensuring that the increasingly decentralised grid is well maintained and can handle its evolving grid mix.
How are TNUoS charges changing?
In the UK, Ofgem regulates TNUoS and other electricity network companies’ charges through a price control framework (i.e. budget) called ‘RIIO’ (Revenue = Incentives + Innovation + Outputs). These run in 5-year periods, with the aim to ensure continued investment in infrastructure, as well as fairness for customers.
With the next RIIO-3 price control period from 1 April 2026 to 31 March 2031, Ofgem has reviewed and significantly increased the charges for this new period. For many businesses, this means an average increase in their TNUoS charges of 60% compared to rates from last year1.
Why are TNUoS charges increasing?
In recent years, the energy transition has brought major changes to the UK’s grid mix and energy system, which was built to handle lower electricity demand and more centralised generation.
Now, electricity generation is becoming much more decentralised, with growing amounts of renewable energy generation located across the country, including far away out at sea, and electricity demand is also increasing due to the electrification of heat and transport
TNUoS charges are increasing because the UK Government is investing heavily in upgrading the infrastructure of the UK’s electricity networks, to facilitate these changes, and ensure long term system reliability, energy independence, and a more sustainable energy network. It’s important that this investment is made now, if the UK is to successfully transition to a sustainable energy future, achieve its Clean Power 2030 targets, and reach net zero by 2050 – a legally binding commitment the UK Government has made.
However, because of this increased investment, consumers will see an initial increase in these charges on their bills, although Ofgem states that this will help to reduce electricity costs in the long term2. Already, we are seeing the financial benefits of increasing the UK’s renewable energy capacity, especially in an increasingly unpredictable geopolitical atmosphere – according to research, the UK’s wind and solar energy capacity has avoided Great Britain costs of £7 million each day, since the start of the conflict in the Middle East3.
How will network charges change in the future?
Looking ahead, although the budget for TNUoS charges is reviewed on a 5-year basis, businesses will still see their TNUoS charges increase year-by-year in the lead up to the next review. This is mainly due to levels of investment required each year increasing as we move through the RIIO-3 period, as the rate at which the grid will be developing will accelerate.
As well as this, DUoS charges are likely to see increases within the next year, to come into effect April 2028, although we currently don’t know to what level these increases will be.
What can businesses do?
Although all businesses must pay TNUoS charges, it’s important that you are aware of your business’s daily consumption, and ensure that your capacity agreement is correct and fit for your usage.
By being aware of your electricity consumption, you can ensure that you are paying TNUoS charges in the correct TCR band – and not the higher one, which could unnecessarily cost you more money.
It’s important that businesses are aware of how both TNUoS and DUoS charges will develop in the future, in order to better prepare them and help them budget. If you’d like to find out more about how these changes could impact your business, please contact us at www.brytenergy.co.uk/contact-us.
