Almost two years ago, Ofgem approved DCP268 DUoS Charging Using HH Settlement Data, which will move existing non-Half Hourly (NHH) settled demand customers onto time-based Half Hourly (HH) Distribution Use of System (DUoS) unit rate charges. With the modification to be implemented in the DCUSA on 1 April, we revisit the changes and consider the impacts on the market.
Currently, DUoS charges under the Common Distribution Charging Methodology differ between HH settled and NHH settled customers. While HH customers face three-rate Red/Amber/Green p/kWh unit rate charges based on half-hourly consumption within each time band throughout the day, NHH customers receive a single p/kWh unit rate DUoS charge (or a two-rate tariff where the meter is capable of recording peak and non-peak volumes). Distribution-connected intermittent generation is currently credited with DUoS on a single-rate unit basis, while non-intermittent generation receives credits on a Red/Amber/Green basis.
From 1 April, all NHH customers will be moved onto Red/Amber/Green (RAG) tariffs, with consumption data for each half hour being estimated using aggregated profiled data. NHH unmetered customers will move to comparable Black/Yellow/Green (BYG) unit rate charges. The use of profiled data means that customer charges will not reflect actual consumption in each time band, and customers will not be able to reduce their exposure to charges by changing their consumption patterns. However, the change will lay the foundations for time-of-use tariffs, as when all customers move to being HH settled the intention is that they will be exposed to time band charges using actual HH consumption.
Following the implementation of DCP268, intermittent and non-intermittent generation will both face the same RAG charges, meaning that non-intermittent generation will be able to be rewarded for generating at peak when they can offset demand. This should address issues with distribution-connected intermittent generation being overrewarded for generating during off peak periods and underrewarded for generating at peak. The DCP268 change report suggests that the change will increase generation credits in all regions, potentially up to a maximum of 18.42% depending on region and alignment of generation to demand peaks. Demand customers may also see an increase of up to 2.6% in charges as a result of the NHH profiling and the intermittent generation changes.
The overall effect of the changes is that the existing 33 DUoS tariff bands will reduce to 16. In approving the change Ofgem said that this should allow greater flexibility for suppliers to offer time of use tariffs in the future. Distribution network operators (DNOs) and suppliers will need to have amended their billing systems in order to cater for the new tariffs and the use of RAG and BYG for existing NHH customers instead of the settlement time pattern regimes. There will be no impact on settlement volumes.
While the immediate impact of the changes for demand customers may not be ground breaking, the move towards time-based DUoS for all customers is seen as a stepping stone to a future where all customers will face charges based on their actual half hourly usage. For intermittent generation connected at the distribution level, the changes may boost revenues as DUoS credits increase, with more reward for generating during peak demand. While there may be further changes to the DUoS tariff arrangements made under the Network and Forward Looking Charges Significant Code Review that could supersede DCP268, these reforms are still a way off, and the changes coming into effect from April should provide a solid platform to build more cost-reflective DUoS charging arrangements in the future.
Keeping track of code modifications and understanding the potential impact for your business can be time consuming, but missing something can bring about significant challenges and risks for your organisation. Our Electricity Modifications Register provides a comprehensive, independent and plain-English update and review alerting you to the most critical governance issues affecting the market – and potentially your business. Likewise, our Weekly Customer Impact Reports provide you with tailored advice on the likely impact of changes to processes, commercials or systems. For more information please contact regulation@cornwall-insight.com.
