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The additional costs faced by National Grid Electricity System Operator (NGESO) to manage the unexpected demand changes as a result of the national lockdown and subsequent economic impact from Covid-19 has led to Ofgem approving a modification to the temporary BSUoS cap which came into effect on the 14th August 2020.
Ofgem approved the first cap on BUSoS (CMP345) on the 23rd June 2020 which deferred costs above £15/MWh for the period 25th June 2020 to 31st August 2020 into the period 2021/22. On the 13th August 2020 Ofgem then approved a modification (CMP350) to lower the cap on BSUoS to £10/MWh and extend the scheme until the 25th October 2020, taking effect from the 14th August 2020. The measure also sets a limit of £100m of costs that can be deferred to the following year.
In summary, more BSUoS costs could be deferred to next year.
The impact of this ruling is that those embedded generators receiving a pass through of BSUoS between 14th August 2020 and 25th October 2020 will receive a slightly lower value in relation to any half hour when the cap is being applied to limit BSUoS to £10/MWh. The value that is added to 2021/22 BSUoS would have increased the embedded benefits in that year; however, an expected outcome of Ofgem’s Targeted Charging Review is to remove BSUoS as an embedded benefit from April 2021.
Supply customers that pay the actual BSUoS cost (rather than a fixed BSUoS amount) will have those costs capped at £10/MWh between 14th August 2020 and 25th October 2020 and will benefit from the modification at these times. However, supply customers on a contract with BSUoS pass through, or any customer that enters into a new supply contract after this ruling, during the period April 2021 and March 2022 will find their BSUoS rates have gone up as NGESO will recover the excess BSUoS cost that was deferred from this year.
For more information, see Ofgem's update on the latest BSUoS changes.