Update letter: Charging arrangements for embedded generation

Correspondence and other

Publication date

Industry sector

  • Supply and Retail Market
  • Distribution Network
  • Transmission Network
  • Generation and Wholesale Market

We published an open letter in July 2016 which discussed the charging arrangements for small distribution connected electricity generators (called ‘embedded benefits’). It set out our initial thinking on the payments these generators receive and also the charges they avoid paying. We expressed our concerns about the specific payments that embedded generators received from suppliers for helping them to reduce the electricity transmission charges they face at peak times (the TNUoS demand residual payments) and we asked for feedback on the issues raised.

Two Connection Use of System Code (CUSC) workgroups (CMP264 and CMP265) have been raised to propose  changes to the Transmission Network Use of System (TNUoS) demand residual. The Final Modification Report (FMR) from these workgroups came to us for decision on 28 November 2016. We expect to make a decision on the CUSC modification proposals that are the subject of the recently received FMR in the first half of next year, following consultation on a minded-to decision and draft impact assessment (IA) in early 2017. Since July we have also progressed our internal work on a targeted review of specific charging issues and reviewed the consultation responses which we received to our July open letter. The non-confidential responses are published on our website.

This letter aims to set out the key developments since our July Open Letter which should provide further clarity to market participants, in particular to those bidding into the upcoming Capacity Market (CM) auctions.