Ofgem has decided to extend a discount on transmission charges for small generators in Scotland by two years to the end of March 2021.

The regulator said the extension would maintain parity between the charging regimes in Scotland and the rest of Great Britain until enduring arrangements can be put in place following its ongoing review of residual network charges.

The discount was introduced in 2005 to offset a discrepancy between the two. In Scotland, 132kV networks form part of the transmission system, while in England and Wales they are part of the distribution system.

As a result, small generators (less than 100MW) connecting at this voltage in England and Wales enjoy multiple financial advantages over their Scottish equivalents known as embedded benefits.

These include a complete exemption from Transmission Network Use of System (TNUoS) charges, as well as triad avoidance payments they can earn from suppliers for reducing their TNUoS charges. The residual element of these payments is being almost entirely removed over a period of three years, which started in April 2018.

The discount was due to expire on 31 March 2019 but Ofgem has chosen to postpone the end date for two years to allow for the regulator to enact the reforms recommended by its significant code review looking at residual network charges.

As part of the review, the regulator has proposed to remove generators’ liability for residual charges and levy them solely on demand under a “line rental” model.

Ofgem turned down a request for the discount to continue until the regulator has also implemented the recommendations of a similar review of forward-looking charges and grid access arrangements.

The regulator said the discount would be unaffected by any changes to forward-looking charges, adding: “We wish to make it clear that there should be no legitimate expectation of the discount continuing beyond the current extension and that any future decision on extending the discount will be made based on the evidence available to us at that time.”

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