Navigating the TNUoS Charge Increase

This article is provided by BRC Associate Member, SQE.

__________________________​

From this April, the fees that industrial and commercial (I&C) consumers pay to use the UK’s electricity transmission system are set to rise substantially, as the start of a multi-year series of price increases to fund the modernisation of the UK’s grid.

For larger consumers, Transmission Network Use of Service (TNUoS) fees can run into the millions of pounds. Modelling we have carried out for businesses suggests that most face increases of 60-90% over the next few years. One business’s charges are set to more than double, to more than £17 million, by 2029.  

In a recent survey we carried out of 200 I&C energy buyers, just 28% of respondents said that they have explicitly budgeted for these upcoming changes. Yet over half (54%) said that they have allowed for general cost increases (e.g., inflation) but not changes to how system or network charges are calculated. A further 15% of respondents admitted that they are aware of potential changes but have not yet reflected them in budgets.

Compounding this lack of preparation, buyers report a widespread failure by suppliers to proactively notify customers of these impending increases. This communication gap leaves energy buyers with insufficient time to adjust their strategies or mitigate rising costs.

However, there are some measures that I&C consumers can take to help bring down TNUoS charges – but the first step is understanding the size of the exposure.

TNUoS – a multi-billion pound bill for UK Plc

TNUoS is the fee paid to use the UK’s high-voltage power transmissions system. It is charged by electricity suppliers and passed through to the transmission owners – National Grid Electricity Transmission, Scottish Power Transmission and SSEN Transmission – to fund the build-out and maintenance of the pylons, cables and substations used to carry power from generators to consumers.

Last December, regulator Ofgem announced what these transmission owners are expected to deliver, and the funding they will receive, over the April 2026-March 2031 period, known as the RIIO-ET3 price control period.

Ofgem’s Final Determinations include ~£10.7 billion of upfront baseline funding for electricity transmission, within a wider pipeline of upgrades that could exceed £70 billion over the period. The costs of this investment will flow through into network charges over the coming years, including TNUoS charges.

Since 2023, and following Ofgem’s Targeted Charging Review (TCR), TNUoS charges have been split into two pots:

• Fixed component. For many larger sites, this now represents the majority of TNUoS. A daily standing charge (£/site/day) is calculated according to the consumer’s TCR band, which is based on voltage level or Available Supply Capacity. This component is paid even if no power is consumed.
• Variable component. The remaining portion is a peak-based locational charge. For sites with half-hourly metering, this is calculated using the three Triads (peak demand periods between November and February). Rates are higher in the south, where the grid is congested, and lower or credited in the north, where there is excess generation.

Electrification changes the risk profile

The UK’s decarbonisation pathway relies on electrifying heat, transport and industrial processes. For I&C users, that typically means higher peak loads – even where total annual consumption is stable.

Under the pre-2023 charging regime, higher consumption meant higher variable charges. Costs rose gradually and proportionally. Under the post-TCR regime, higher peaks can trigger structural shifts in fixed charges.

In other words: electrification does not just increase energy spend. It can permanently increase network costs. That represents a different kind of risk for I&C consumers.

Costs set to triple or quadruple

To illustrate the scale of the issue, we modelled typical electricity demand profiles seen in large I&C portfolios. In the table below, we provide two examples looking at the fixed component of TNUoS charges. These forecasts run from 2026 to the end of each business’s current supply agreement.

Business 1 will see its TNUoS costs more than double between 2026 and 2029. These increases come on the back of already substantial increases in recent years. In total, this business’s network charges will be over 1000% of their 2021 levels by the end of the decade – meaning that it is predicted to spend tens of millions on TNUoS charges over the four years to the end of 2029. For Business 2, the forecasted increase is 200% from 2023 to 2027.

Table: TNUoS fixed component cumulative % increases: two examples

Note: The examples above use representative electricity demand profiles modelled by SQE. They illustrate how TNUoS charges can evolve under current forecasts.

These increased charges could have considerable impacts on I&C businesses. For those operating on mid-single-digit margins, increases of this scale can require very substantial additional revenue just to absorb higher network costs.

Unbudgeted increases? Mitigating the TNUoS shock

Under the pre-2023 TNUoS charging system, which was largely based on power consumed, it was possible to substantially reduce payments by curtailing consumption during the three Triad peak-demand periods. However, the introduction of the banded residual under the TCR has materially reduced the impact of Triad avoidance.

Instead, there are three strategic levers companies can pull to mitigate TNUoS charges.

Behind the meter systems. By investing in on-site renewable generation or battery storage, a consumer can ‘peak shave’ and potentially reduce its Available Supply Capacity band, which is the primary metric for TCR costs.

This is a robust way to permanently lower exposure to both the fixed and locational elements of TNUoS, but it requires high capex and is complex to action and manage.

Demand-side response. Under the post-TCR regime, most of the TNUoS fees are banded and capacity linked. For many larger sites, the residual charge is driven by agreed capacity, not just half-hourly performance. That changes the role of flexibility.

As sites electrify heat, fleet or process, unmanaged peak growth can require an uplift in agreed capacity. In some charging categories, that can move a site into a higher residual band – increasing network costs for the charging year and potentially beyond.

In that context, DSR is less about shaving demand during the Triads and more about avoiding structural step-changes in fixed costs.

The real question isn’t “can we reduce a few half-hours?” It’s “are we modelling how electrification alters our long-term cost base?”

Strategic site selection. By locating in generation-heavy parts of the UK, such as northern Scotland, rather than demand-heavy areas such as south-west England, users can pay significantly lower charges. In some northern zones, the locational element can actually be a credit (although the fixed residual still applies).

These decisions could lead to millions of pounds in savings over a 10-year lease for large industrial users. However, this is often impractical or at least very high cost for existing sites, and may be more of a consideration for new sites. Indeed, the introduction of such large locational signals in electricity costs could have major impacts on the UK’s industrial landscape, influencing where energy-intensive business are established.

Taking the next steps

As electrification accelerates and network investment ramps up, fixed network costs will become a larger and more structural part of industrial energy spend.

Businesses that treat TNUoS as a pass-through line item will be exposed. Those that model it will make better capital, operational and location decisions.

Yet many I&C companies still lack a forward view of their network cost trajectory. In too many cases, suppliers have not proactively modelled or communicated the scale of upcoming increases. Some simply do not have the systems to do so.

Every significant power consumer should ask its supplier for the data to model these likely costs. If your supplier can’t provide you with that data and transparency, you are not managing risk, you are just paying their bills.