There is a single electricity licence relating to the GB transmission system that covers both System Operator (SO) activities and Transmission Owner (TO) activities. There are currently three transmission licensees each of which is permitted to develop, operate and maintain a transmission system within a distinct transmission area (SPTL in south of Scotland, SHETL in north of Scotland and NGET in England & Wales). The SO function, coordinating and directing flows onto and over the GB transmission system to balance electricity generation and demand, is carried out for the whole GB (to include offshore transmission networks) by NGET. Only one licensee is permitted to carry out SO activities. The TO activity function involves the provision of transmission network services to the SO, enabling NGET to fulfil its SO licence obligations.
The provision of network services is linked to providing transmission capability at different locations and is facilitated by the TOs building, operating and maintaining their transmission assets. The allowed costs associated with providing this capability are set by Ofgem as part of the price control process and are recovered by NGET as SO, via contracts with users for connection to and use of the GB transmission system.
Users of the transmission system are subject to three types of transmission charges; Balancing Services Use of System (BSUoS) charges, connection charges and Transmission Network Use of System (TNUoS) charges, explained below. Each type of charge is payable to NGET as SO.
- Connection charges - these are charges for the provision and maintenance of connection assets, which are assets solely required to connect a particular user (for example, a generator) to the main transmission system. The costs of these assets are recovered under the remit of the NGET's connection charging methodology. NGET defines "connection assets" as those assets solely required to connect an individual user to the GB transmission system, which are not and would not normally be used by any other connected party. The costs of these assets are recovered directly from the generator via connection charges.
- The above definition used to derive connection charges excludes all assets which are shared or could be potentially shared by more than one user (transmission infrastructure assets). TNUoS charges recover the cost of the provision and maintenance of shared electricity transmission assets, or in other words, assets that cannot be solely attributed to a single user. TNUoS charges are recovered from all users of the GB electricity transmission system. These charges vary by location, reflecting the costs that users impose on the transmission network to source (demand) or send (generators) their electricity.
- BSUoS - these charges relate to the costs of the day-to-day operation of the transmission system and include charges for the recovery of constraints costs.
In terms of charging, the primary requirement of the Transmission Licence is that the various charging mechanisms should achieve the “Relevant Objectives” of facilitating competition; reflecting costs incurred; and taking account of developments in the transmission and connection businesses.
While the form of the methodologies must be approved by Ofgem, we do not set or approve the level of individual charges. It is the transmission companies’ responsibility to propose and consult on changes to the methodology. Changes to the methodology are subject to a veto by Ofgem.
The transmission licence describes the process which must be followed as and when NGET wish to modify the charging methodologies in order that the relevant objectives are better achieved.
NGET is required to consult on any proposed modifications with users and to submit its proposal to the Authority. Ultimately the Authority takes a decision on whether or not a modification may be made.