Next year will see a number of charging amendments further contribute to ever-growing non-energy costs, but there is still more than sufficient time for your organisation to stem the potential impact on bills...
Back in July, we wrote about the reasons behind the unstoppable rise of non-energy costs (also called non-commodity or third-party charges).
These costs – the obligatory charges, levies and taxes set by the government that cover the price of running the UK’s gas and electricity networks – have gone from making up just 25% of consumer energy bills in 2012, to accounting for approximately 60% of what you see on your monthly invoice today.
By 2020, the non-commodity share of energy bills is expected to rise to 70%, with non-domestic customers set to be hit even harder by higher price hikes than domestic customers. As a result, it has never been more important to have a clear picture of your energy costs.
Now, with 2018 now approaching – a year which will see a number of charging amendments further contribute to the rise in costs – we take a more specific look at the changes on the horizon, and how these will impact on bills.
Renewables Obligation exemption
As of 1 January 2018, Energy Intensive Industries (EII) such as mining and heavy manufacturing will be exempt from Renewables Obligation (RO) – the mechanism designed to support large-scale renewable electricity generation – subject to parliament approval in October.
While this is good news for EIIs, for other energy consumers, it means picking up the tab. The RO for non-exempt businesses is expected to rise to an estimated average of £19.60 MW/h next year, accounting for 17% of total energy bills.
According to Ofgem’s impact assessment, non-EII heavy energy users will see an annual increase of between £23,400 and £107,400 in charges as a result.
Distribution Use of System (DUoS)
DCP 228 – the name of the upcoming regulatory change brought in by OFGEM – will see a modification to the way Distribution Use of System (DUoS) are calculated. You can find out how and why this is happening by reading our blog on the new legislation.
Unfortunately, the change – which takes effect in April 2018 – means most business customers will see a rise in costs unless consumption patterns are altered.
As an estimate, DUoS charges will rise to an average of £14.70 MW/h in 2018, accounting for 13% of energy bills.
The Capacity Market – which has been introduced by the government to ensure sufficient reliable capacity is available (by providing payments to encourage investment in new capacity) – is expected further contribute to rising costs this winter.
The capacity charge is estimated to increase by up to £7 based on peak-period usage between November 2017 and February 2018.
Contracts for Difference
Large scale subsidies via the CFD Feed in Tariff (FiT) - which works by guaranteeing a fixed price (strike rate) for energy generation companies based on wholesale rates - will also hit bills harder next year. Having been £0.76/MWh this time last year, the cost is expected to rise to £5.20MW/h in 2018.
Transmission Network Use of Service (TNUoS)
The overall Transmission Network Use of Service (TNUoS) charge for consumers is expected to go from an £2.7 billion per annum in 2017 to over £3.7 billion by 2020/21. This will translate to a forecasted cost of £7.14MW/h.
*For a full overview of non-energy cost changes, download out latest energy market report free of charge here. The report breaks down each component that contributes to your bill and provides a forecasted cost for 2018, a description of the charge, and advice on to do to counter some of these costs.*
...but surely it’s not all bad news?
While it’s true, and in some cases unavoidable, that rising non-energy costs will lead to pumped up energy bills, there are certain things you can do to keep outgoings at a minimum. Importantly, there is also still sufficient time between now and when many of the charges detailed above will take full effect.
We have been helping organisations understand the complex energy markets for 20 years and our services are proven in delivering significant cost, time and resource savings.
Effective energy purchasing is the first step to reducing your overall energy budget. However, it can be a complicated and time consuming process that can have a considerable impact on your bottom line if not managed correctly.
Using a range of sophisticated systems, our expert team will work with you to develop an effective energy management strategy, allowing you to reduce your energy spend and streamline your operation.
With non-energy costs continuously changing and notoriously hard to predict, they need to be constantly monitored and analysed to ensure consumers can accurately budget for their future bills.
Aside from offering impartial advice and expert market knowledge to deliver the best priced energy for your business, we can help you budget for these future uncertainties and even recover historic monies overpaid, ultimately guaranteeing that you never waste a penny on energy costs again.
So what are you waiting for?
Interested in our services? We can complete a competitive market tender on your behalf and provide you with an exclusively tailored Energy Market and Risk Review completely free of charge.
For more information on this, and how we can help your organisation achieve its sustainability and energy goals, don’t hesitate to get in touch. Contact us on 02920 739 540 or email and we'll get back to you.