balancing-services-use-of-system-charges

BSUOS: Balancing Services Use of System Charges Explained 

Information / / By

The Balancing Services Use of System (BSUoS) charges are the costs of balancing and operating the transmission system and balancing it.  

 

Balancing costs are volatile and have been on the rise in recent months due to the unprecedented rise in gas and electricity costs, as well as very low wind load factors. These costs have been reaching record highs especially over the last 12 months, since Summer 2021. Between September 2021 and November 2021 they doubled compared to the year before and reached £1 billion. 

 

To prevent even more increases and avoid these costs getting extremely high during winter 2021/2, an Ofgem modification known as CMP381 was introduced as a short-term measure. This modification has set the price cap at £20/MWh and was in place until the end of March 2022. Since then, however, the UK has been facing an unprecedented energy crisis and the BSUoS has been becoming higher again.  

 

Unfortunately, forecasts for the future predict that the BSUoS costs will become more expensive in the future, particularly as more wind generation is used. ‘We have seen the perfect storm of low renewable generation and an increase in global demand for gas which has put the UK’s limited capacity on the edge, forcing prices to repeatedly break new ground,’ Rajiv Gogna, Partner at LCP Energy Analytics, told Energy Lives News.  

 

Higher BSUoS charges could lead to additional constraints on the network.  

 

At some point, Ofgem suggested that BSUoS charges should be removed from generators connected directly to the transmission network. This would mean that only Final Demand users need to worry about the cost. 

 

Key facts about the Balancing Services Use of System Charges 

 

The key facts about the BSUoS charges are: 

  • They recover the costs of balancing and operating the transmission network 

  • There is no fixed allowance, recovery costs are incurred 

  • They are paid by the users of the transmission system, namely generators and suppliers 

  • They are calculated in accordance with the Statement of Balancing Use of System Charging Methodology. 

 

What costs does BSUoS include? 

 

BSUoS charges include a number of costs, services, and special provisions. These are: 

  • The total cost of the balancing mechanism 
  • The total cost of balancing services contract 
  • Payments from the National Grid incentive scheme 
  • The cost of operating the transmission network 
  • Costs related to contracting and developing balancing
  • Costs of Manifest Errors
  • BETTA implementation costs. 

There are two components of the BSUoS changes: 

  • External – what National Grid pays providers for delivering balancing services 
  • Internal – what businesses pay for providing this function. 

Financial Settlement 

 

There is two stage Financial Settlement: 

  • Settlement Final (SF) – the company calculates initial settlement BSUoS charges using the latest available data, for example, from the Initial Settlement Run and the Initial Volume Allocation Run 
  • Reconciliation Final (RF) – the company calculates a reconciled charge for each settlement day in the scheme year using the latest available data, for example, from the Final Reconciliation Settlement Run and the Final Reconciliation Volume Allocation Run. 

Calculating the BSUoS charges 

 

As for calculation and billing of the BSUoS charges, they are apportioned on a half hourly £/MWh basis. They are charged half hourly and billed daily and they are applied proportionally according to the user’s portfolio share.  

 

To calculate one’s BSUoS Charge, the following formula can be used: 

 

BSUoS Charge = BSUoS tariff £/MWh x BM Unit Metered Energy Volume (MWh) x Transmission Loss Multiplier x Trading Unit Delivery Mode (+ or -1). 

 

What is the Balancing Mechanism? 

 

The Balancing Mechanism is the main tool of the National Grid and the TSO (Transmission system operator) to balance the supply and demand on electricity in the UK network.  

 

‘When the TSO predicts that there will be a discrepancy between electricity production and demand during a certain time period, it may accept a ‘bid’ or ‘offer’ from a market participant to either increase or decrease generation (or consumption). The operation of the BM relies on the flow of data and information between the TSO and market participants. This happens in real time to ensure that system balance is maintained. The TSO specifies the interfaces that must be used for these processes, to comply with the Balancing and Settlement Code (BSC),’ KYOS explains. 

 

Although the Balancing Mechanism is the primary means to keep the UK’s system in balance, National Grid and TSO also use other mechanisms.  

 

Frequently Asked Questions  

 

What is ESO UK? 

 

The Electricity System Operator (ESO) is responsible for second-by-second balancing of electricity supply and demand in the UK. In addition to that, it develops markets and plays a role in the UK’s net zero transition.  

 

Who pays BSUoS? 

 

BSUoS charges are paid by the following customers: 

  • Generators 
  • Suppliers.  

 

In the past, interconnectors also had to pay them but they have been exempt since 28 August 2012. Typically, customers who need to pay BSUoS also pay TNUoS (Transmission Network Use of System).  

 

What are BSUoS charges? 

 

BSUoS charges are the cost of balancing and operating the transmission system. This means that they are associated with day-to-day operations of generators and electricity suppliers.  

 

BSUoS charges are calculated daily based on the amount of energy imported from or exported onto the network (£/MWh) within each half-hour period.