Energy regulator Ofgem has published an open letter discussing potential reforms on the design of transmission charging.
Penned by Eleanor Warburton, interim director of energy systems management and security at Ofgem, the organisation has been considering strategic reforms of Transmission Network Use of System (TNUoS) charges.
Potential changes to the market include implementing effective and improved operational and investment signals.
According to Ofgem: “These changes will explore how network costs should be recovered through network charges and how network charging signals contribute to both investment decisions and how market participants and consumers use the energy system.”
The overarching aim of the reforms is to ensure that the TNUoS regime remains fit for purpose for the system of the future, factoring in some of the changes the transmission network will witness over the next decade.
The letter highlights that the current system is designed to send cost-reflective, relative price signals to network users. Doing so helps to incentivise efficient network use and development by ensuring that network users face charges that reflect the costs of benefits arising from their choice of location.
Ofgem’s stated that “transmission-connected generators that are located in areas closer to demand have a lower tariff and may even receive negative charges under the current TNUoS framework. However, where generation capacity is located in an area far from demand, then a locational wider TNUoS tariff is higher”.
To help implement changes, Ofgem established the TNUoS Task Force. This group will focus on the potential changes to improve the stability and predictability of the existing framework such as inputs to the transport model and assumptions about different users’ impacts on the network.
The Task Force intends to implement changes between 2025 and 2026, Ofgem said.
It is also worth noting that the energy regulator is also supporting the government in its consideration of market reform options by providing advice on options under consideration and the interdependencies between them.
