What is BSUoS?
BSUoS is the Balancing System Use of Service charge. It is a financial charge levied at users of the transmission system (generators and suppliers) by National Grid Electricity Service Operator (NG ESO). Its purpose is to recoup the costs of the day-to-day operations that take place to balance the system. BSUoS is charged for each half-hour settlement period, and then billed daily, on a £/MWh basis (proportionate to how much a given asset has used the system).
Assets that aren’t connected to the transmission system - for example, interconnections, small distributed generators, and behind-the-meter generators - do not pay BSUoS. This creates a disadvantage for transmission-connected, BSUoS-paying assets relative to their non-transmission peers, which in turn can result in distortions within the wholesale market as those assets consider how to offset BSUoS charges.
Currently, when a generator is charged BSUoS, some of that cost may be factored into the price at which they provide energy to suppliers. This means that wholesale energy costs are higher than they could be. Subsequently, this cost to supplier is then passed onto the end consumer. Roughly half of the BSUoS cost is included as part of the customer’s non-energy costs, and the other half as part of their energy price.
What changed this year?
In April 2021, ‘double charging’ of storage assets ended. Previously, all users of the transmission system, including storage, were charged for generation and import. However, as storage assets already help to balance the system, they were deemed to be at an unfair disadvantage. Not only were they balancing the system, they were being charged for doing so.
As such, after consultation, it was decided that storage assets would only be charged for generation (and not import) from April 2021 onwards.
What further changes are coming?
Further changes to BSUoS are coming - soon to be confirmed by Ofgem, and due to take effect on 1 April 2023. Generators will be exempt from BSUoS charges. This is because an Ofgem BSUoS Task Force concluded that “Final Demand” (i.e. the end consumer) should be liable for all BSUoS charges, and that these charges should be fixed in advance.
BSUoS charges will now be split into fixed winter and summer charges that will be recovered annually, and the cost of these will be announced by NG ESO the February before (based on their forecasts for the cost of balancing the system). If BSUoS ends up costing more than forecasted, this price will be added into next year’s costs. In future, the whole BSUoS cost will be charged as part of the customer’s non-energy costs within their contract, making the process simpler and more transparent.
This brings with it potential risks and rewards for both NG ESO and the end consumer:
- By fixing the cost of BSUoS in advance, the end consumer will be able to better predict and manage their energy costs.
- Exempting generators from BSUoS should mean that wholesale prices decrease.
- Inaccuracy and underestimation in any ESO forecasting could lead to a sharp rise in the next year’s prices for the end consumer. (For example, the daily average of BSUoS charges rose from £2.52/MWh in 2017 to £4.94/MWh in 2020. It is not beyond the realms of plausibility that we could see further, steeper hikes in future, as it becomes more difficult to balance the system.)
At some point, NG ESO needs to recover the costs of balancing the system. These changes take this into account, and as such they do not represent a root-and-branch upheaval. Instead, the changes are largely common-sense simplifications of the current system, designed to remove any perceived competitive disadvantages and provide more transparency to all involved (from generator to end consumer).