Ofgem sets out scope for transmission charging task forces

Ofgem has set out its current thinking on the expected scope of the transmission network charging task forces announced by the regulator earlier this year.

The task forces will explore improvements to the methodology for calculating locational Transmission Network Use of System (TNUoS) charges whilst “keeping its core assumption and modelling approach unchanged”. However, Ofgem said this does not rule out “significant changes” to the methodology.

Following a call for evidence last year on whether they should be reviewed and priority areas for reform, Ofgem announced in February that National Grid Electricity System Operator (ESO) would be asked to launch and lead one or more task forces to examine and address the root causes of the unpredictability of TNUoS charges.

The regulator said this would enable short-term changes to be made whilst it undertakes a “significant programme of work” looking at the longer-term structure and purpose of the charges.

Ofgem has now stated that it considers the following subjects to be appropriate for consideration by the task forces:

  • Improvements to the data inputs for the locational TNUoS methodology following a review to identify and quantify their effect on the predictability of TNUoS tariffs as a long-run investment signal
  • The calculation of the wider TNUoS charge components (excluding the adjustment tariff used to maintain compliance with a regulatory limit on average annual charges) and the approach to zoning
  • How closely the TNUoS methodology should align with the ‘real world’ operation of the transmission system
  • The identification, consideration and suggestion of new inputs to the locational TNUoS methodology
  • Existing data inputs such Charging Bases and Error Margin Calculations
  • Determining which elements of TNUoS charges should be paid by distributed generators
  • The appropriate treatment of islands connections and offshore developments
  • Changes that could simplify the methodology and make it more approachable to new market participants

Ofgem said this is not intended to be a “definitive list” and that the task forces should consider “any relevant topics they identify during discussions”, provided they do not fall within the following areas, which it deemed to be out of scope:

  • Moving away from load-based modelling
  • Longer-term work on the purpose and structure of TNUoS charges, including the trade-off between market signals, network planning and network charging signals
  • The depth of connection charges
  • The methods the ESO uses to forecast inputs to the charging methodology
  • Changes to how non-locational TNUoS charges are recovered, which Ofgem said has been dealt with in the Targeted Charging Review – it’s significant code review of residual charges and embedded benefits

Ofgem said although there may be a need for multiple task forces, it latest update is focussed on the first to be formed. It said this task force is expected to have twelve total meetings, being held twice each month.

The regulator said it expects the group to have at least 12 members – four from generators, one from a storage operator, three from energy suppliers, one each representing domestic and non-domestic consumers, one from the ESO and one from Ofgem itself. There will also be one observer each from transmission owners and distribution network operators.

It said remaining members will be chosen to balance across these categories and cover types of networks users that may not otherwise be reflected in the above list.

Ofgem has asked the ESO begin inviting applications to join the task force over the coming weeks, with the aim of establishing the membership by the end of June.