Upcoming Charging Changes – What does this mean for businesses?
The UK energy market is set to undergo significant changes, driven by initiatives designed to support Energy Intensive Industries (EIIs) and advance nuclear energy projects. Key developments include the Energy Intensive Industry Support Levy, the Network Charging Compensation (NCC) scheme, and the Nuclear Regulated Asset Base (RAB) model for new nuclear projects. This article breaks down what these changes mean, when they’ll take effect, and how they could impact businesses.
Energy Intensive Industry (EII) Support Levy
As part of the British Industry Supercharger Initiative, the Department for Business and Trade (DBT) has introduced several initiatives to make domestic Energy Intensive Industries more competitive globally by offering significant cost reductions on network charges.
The EII Support levy is being applied to electricity suppliers, who are expected to recover costs from consumers.
A key Change to be aware of is the Network Charging Compensation (NCC). Under the NCC scheme, EIIs will receive 60% compensation on their network charging costs, covering Transmission Network Use of System (TNUoS), Distribution Use of System (DUoS) and Balancing Services Use of System (BSUoS). While EIIs will continue to pay these network costs upfront, they will receive 60% reimbursement within 12-15 months.
How will it be funded?
The NCC scheme will be financed through the EII Support Levy, applied to electricity suppliers, who are expected to recover that from consumers. The levy will be based on suppliers’ market share of chargeable demand starting in April 2024. However, levy collection will not begin until 12 months later.
Costs estimates
Elexon are the appointed scheme administrator and have published initial estimates for the first three months (April–June 2024), suggesting supplier costs will range between £0.60 MWh and £0.80 MWh. Monthly variations will depend on national electricity demand, with April’s average expected to be around £0.60 MWh.
While we await further clarity on charge structures, suppliers, EIIs and other consumers should prepare for these changes to impact their electricity bills in the coming year.
Nuclear Regulated Asset Base (RAB) model
The government has taken a major step forward in nuclear energy by designating Sizewell C as the first project to use the Nuclear Regulated Asset Base (RAB) model. This new funding approach aims to support the construction and operation of nuclear plants while sharing costs with suppliers.
How the RAB model works
Allowed Revenue (AR): Ofgem will set an annual Allowed Revenue (AR) for the nuclear plant, typically by 1st February each year.
Revenue Mechanisms: During the construction phase, nuclear plants will receive their full AR and once operational, the nuclear plant will sell electricity into the wholesale market, generating Market Revenue (MR). If MR falls short of AR, suppliers will fund the difference through Difference Payments.
Key timelines and expectations
Initial trigger for RAB revenue collection was expected by the end of 2024. However, in the Autumn Budget, the government announced that Final Investment Decision (FID) for Sizewell C will now be confirmed in Spring 2025.
Once FID is confirmed, Ofgem will trigger an Interim Levy Rate (ILR) and Total Reserve Amount (TRA), to be invoiced to suppliers with 30 days’ notice, who are expected to recover that cost from consumers. The payments are unlikely to begin before April 2025.
The Interim Levy Rate (ILR) calculation will be based on AR and national gross demand (using the same demand base as CfD, where EIIs remain exempt). It will be reconciled quarterly to reflect daily demand.
What remains unclear
While the frameworks are in place, some important details remain unknown. Ofgem has not yet released how the Allowed Revenue will be determined. As well as the exact costs for suppliers and commencement dates, which are still pending. However, DESNZ (The Department for Energy Security and Net Zero) is expected to release forecasts soon.
What does this mean for businesses?
For Energy Intensive Industries the NCC scheme will significantly reduce costs, improving cash flow and global competitiveness.
Suppliers and consumers must prepare for the EII Support Levy and future ILR charges under the RAB model.
While collection is staggered, long-term planning will be essential. For the market and consumers, as these schemes evolve, suppliers may adjust costs across the electricity value chain.
Looking ahead
These upcoming changes reflect the government’s dual focus on supporting energy-intensive businesses and delivering sustainable energy infrastructure. While the NCC scheme offers immediate relief for EIIs, the Nuclear RAB model is a long-term investment in clean energy security.
We’ll keep you informed as more details emerge, so you can prepare your business for the evolving energy landscape.
Supporting information
Energy Terms Glossary: Access this glossary of energy-related terms available on the website to help understand acronyms and terminology in the energy sector
Energy Intensity Industry (EII): For EIIs interested in registering for the Network Charging Compensation scheme, they can do so through Elexon
EII Industries List: A list of industries related to EII can be accessed here
TalkPower Info: For more information on EII, head to our webpage
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