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Ofgem approves temporary BSUoS cap

By Market Insight Team | Posted June 30, 2020

Ofgem has moved rapidly to approve a modification to the CUSC to defer BSUoS costs above a cap of £15/MWh to 2021/22. Modification CMP345 was originally proposed by SSE to help those facing financial difficulty in light of National Grid’s estimate of a £500m increase in balancing costs caused by significantly lower demand from the country being in lockdown and an exceptionally sunny spring. Ofgem agreed to a milder variant to SSE’s original proposal which has come into effect from 25th June 2020 until 31st August 2020, inclusive. BSUoS charges are levied by National Grid Electricity System Operator (ESO) on a half-hourly basis. Under this variant, any excess in any half hourly period above the £15/MWh cap will be recovered by ESO in the financial year 2021/22 by way of a uniform monetary (£) increase to the cost used to calculate BSUoS. 


So, what's the impact on embedded generators and suppliers?

The impact of this ruling is that those embedded generators receiving a pass through of BSUoS between 25th June 2020 and 31st August 2020 will receive a lower value in relation to any half hour when the cap is being applied to limit BSUOS to £15. The value that is added to 2021/22 BSUoS would have increased the embedded benefits in that year. However, an expected outcome of Ofgem’s Targeted Charging Review is to remove BSUoS as an embedded benefit from April 2021. 

Supply customers that pay the actual BSUoS cost (rather than a fixed BSUoS amount) will have those costs capped at £15/MWh between 25th June 2020 and 31st August 2020 and will benefit from the modification at these times. However, supply customers on a contract with BSUoS pass through, or any customer that enters into a new supply contract after this ruling, during the period April 2021 and March 2022 will find their BSUoS rates have gone up as ESO will recover the excess BSUoS cost that was deferred from this year. 


Introducing the Optional Downward Flexibility Management (ODFM)

The ESO also moved swiftly to temporarily introduce a new balancing service called Optional Downward Flexibility Management (ODFM) in response to the same conditions which are impacting BSUoS. During periods of low demand and high renewable output the ESO has been calling upon embedded generators that have signed up to the scheme to assist in balancing the grid by curtailing their output. EDF moved quickly to support the ODFM service by ensuring participating generators receive the compensation from the ESO through their PPAs when instructed to reduce output. 

To learn more about the ODFM service contact and one of our experts will get in contact with you.  

You can also read our latest Monitor report to get our view of BSUoS and other non-energy costs forecasts. Login or sign up today. 

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