BSUoS reform: why and how charges are changing

What is BSUoS?
BSUoS (Balancing Services Use of System) is a pot of money that the National Grid spends on the balancing of power across the entire electricity network.

Without this balancing system, energy input to the grid could fall less than demand, which would leave the nation at risk of blackouts.

Currently, the costs of balancing the system are recovered from suppliers and generators through BSUoS charges. At present:
 

• 50% of the overall network bill is collected by generators, and they recover that by adding it to the cost of wholesale energy
• The remaining 50% is added as a cost to consumers through a BSUoS component in their contracts.
   

What is changing?
As part of the network charging reform, a group of industry experts concluded that BSUoS costs will be collected solely from suppliers. This modification is referred to as CMP308.

The CMP308 decision was made to better align with European markets, where balancing is already covered by the consumer rather than the generators. It was also decided that BSUoS will become a rolling fixed cost, unless a threshold is breached, at which point additional charges would be levied on suppliers. This modification is referred to as CMP361.

What does CMP308 mean for customers?
From 1st April 2023, all of the BSUoS cost will be levied directly onto customers, meaning the BSUoS charge will essentially double in rate. However, as generators will no longer pay the BSUoS charge, moving forward, they will likely be able to offer cheaper wholesale power. This should create a parity where there should be no overall increase for customers – the wholesale price will go down, matching the increase in their BSUoS contribution.

CMP361 at a glance
Ofgem has made the decision to fix BSUoS rates in advance to make it easier to forecast costs and provide greater transparency.

The fixed cost period will be 6 months (either 1st April to 30th September or 1st October to 31st March) and the costs will be published 9 months before the start date. For example, the cost for the period 1st April 2024 – 30th September 2024 will be confirmed by the end of June 2023. Due to the timing of Ofgem’s decision, BSUoS rates for the whole 12 months from 1st April 2023 – 31st March 2024 were set at the end of January 2023.

What does CMP361 mean for customers?
BSUoS remains a very difficult cost for National Grid to forecast, so there is a risk that the actual cost outturns higher than the BSUoS rates they have set in advance. This means that:
 

• If the outturn cost is higher than National Grid’s forecast for a 6-month period, they will cover the total under forecast up to a £300m limit.
• If the cost remains under the £300m limit, National Grid will adjust their next published fixed cost period to recover the under forecast from the current fixed cost period.
• If the cost goes over the £300m limit, National Grid will pass on any excess cost to suppliers. Suppliers will then need to pay this additional cost to National Grid.
   

Different suppliers will take different approaches on how to recover this cost from their customers. For EDF’s fixed price contracts, customers on our premium Fixed + Peace of Mind product will remain fully protected against any excess charge, either as a result of the £300m fund being exceeded or any change to the future forecasts. For customers on our Fixed + Standard product, EDF Energy reserves the right to pass on this additional cost.

It is important that when you compare offers, you understand how BSUoS charges will be recovered to ensure you make an informed decision on the correct product.