Electricity Pass-through costs explained

The Single Electricity Market (SEM) is the wholesale electricity market for the island of Ireland and is regulated by the SEM Committee. The SEM consists of a number of electricity trading markets and is administered by the SEM operator (SEMO). New market arrangements for the SEM were introduced on 1 October 2018 improving efficiency and facilitating effective competition in the market.

The Utility Regulator approves network charges and public service obligation (PSO) charges whereas the Single Electricity Market Committee (SEMC) approves SEM charges. Regulated entitlement values are calculated for tariff years (normally 1st October to 30th September). Network and PSO charges are collected by: NIE Networks (Northern Ireland Electricity Networks) and by SONI (System Operator Northern Ireland), whereas the SEM charges are collected by SEMO (Single Electricity Market Operator).

Transmission Use of Systems (TUoS)

The Transmission Use of System charges are the charges associated with provision of access to and use of the transmission grid. The revenue collected from TUoS is used to cover the cost of operation, planning and development of the transmission network. The charges and their structure are overseen by the Regulatory Authorities and are normally recalculated annually from 1st October.

Distribution Use of Systems (DUoS)

The Distribution Use of System charges are the charges associated with provision of access to and use of the transmission grid. The revenue collected from DUoS is used to cover the cost of operation, planning and development of the transmission network. The charges and their structure are overseen by the Regulatory Authorities and are normally recalculated annually from 1st October.

Public Service Obligation (PSO)

The Public Service Obligation Levy (PSO) is mandated by the Government and approved by the European Commission to support the generation of electricity from sustainable, renewable and indigenous sources. The levy is calculated and certified annually by the Regulator and includes considerations for NIE Land Bank, Legacy generation costs, The Northern Ireland Sustainable Energy Programme (NISEP) and a correction allowance known as the K factor.

System Support and Services (SSS)

These regulated charges cover the cost of SONI and the ancillary services required to operate the transmission system safely and reliably. Revenue is apportioned across each kW of electricity consumed

Supplier Capacity Charges price

With the introduction of the new SEM market arrangements, a new Capacity Remuneration Mechanism (CRM) was also implemented. The new CRM is designed to secure sufficient generation capacity through a competitive auctions process to aid security of supply.

Difference payment socialisation Multiplier

The Difference Payment Socialisation Multiplier is a new mechanism in I-SEM. The revenue to fund awarded capacity is recovered from suppliers through a capacity charge. In return the suppliers are hedged against high energy prices. The purpose of building up the fund through a tariff is to ensure suppliers are fully hedged against high price events. This is separate to the Supplier Capacity Charge itself.

Residual Error Volume Price

Residual Error Volume Price (REVP) relates to differences between actual and metered volumes, that can swing in both positive and negative directions and occur at a market level.

Currency Cost price and currency Adjustment charge factor

Due to the existence of two currencies within the SEM/I-SEM, variation between these can occur in incoming and outgoing amounts in the market over the year. This variation is covered through the Currency Adjustment Charge

Collection Agency Income Requirement (CAIR)

Moyle’s transmission licence permits them to raise revenues from sales of capacity on the Moyle interconnector and to recover the balance of its revenue requirements from payments received from SONI under the Collection Agency Agreement. The Collection Agency Income Requirement which SONI collect from suppliers and pay to Moyle Interconnector Limited is apportioned across the predicted units transmitted.

Market Operator Charges (MO)

SEMO incurs operational costs while carrying out its functions and recovers these costs, together with capital related costs including a rate of return, through Market Operator tariffs and fees, which are levied on market participants. To facilitate this recovery of costs, the Market Operator submits proposals on its allowed revenue and the charges required to recover this revenue to the Regulatory Authorities

Imperfection Charges

Imperfections charges are mainly the costs associated with constraints on the all-island transmission network. Constraints are caused by network bottlenecks (such as the North-South interconnector, which is one of the most significant). These constraints result in the system operators (SONI and EirGrid) taking action to ‘balance’ the system in order to ensure stability of the electricity system. These actions are a normal and necessary part of electricity markets in other jurisdictions but are particularly important in the SEM, which is a small and highly constrained electricity system that has a high level of renewable generation

Northern Ireland Renewable Obligation (NIRO)

NIRO supports large scale renewable electricity projects in
in Northern Ireland since 2005. There is a UK-wide market for Renewables Obligation Certificates (ROCs). The Renewables Obligation places an obligation on suppliers to provide a specified number of NIROCs per MWh of electricity supplied. The obligation is set annually by local government. It is based on a prediction of the amount of electricity that will be supplied in Northern Ireland and the number of ROCs that Ofgem will issue to eligible renewable generators

Availability Charges

This is a monthly charge for providing and maintaining a suitably sized supply. It is based on a connections Chargeable Service Capacity (CSC) which reflects the highest capacity demand that a site required in the previous tariff year. Changes are being proposed by NIE Networks to make costs reflective of a meter points Maximum Import Capacity (MIC) which was established at the time of connecting the electrical load to the network and reserved for this purpose. A substantial level of unused capacity on the distribution network has occurred because CSC’s are significantly below MIC’s (in aggregate) and this has resulted inexpensive and in many cases, unnecessary reinforcement to facilitate the connection of new load. Currently, existing customers have no incentive to reduce their MIC to a value that closer reflects their usage. Therefore, to address this issue of underused capacity, NIE Networks propose a complete review of how capacity charges are applied by moving to a charge based on the contracted MIC value.

Standing Charge

The standing charge is a fixed daily cost on your bill regardless of how much electricity you consume. It is a combination of the fixed charges associated with providing and maintaining the supply of electricity, the collection of meter readings and a share of the supplier costs in servicing. A base figure is approved by the Regulator annually, but Suppliers may include additional amounts. The cost can be shown as a daily amount or a fraction of the annual amount depending upon which Supplier raises the bill.

Reactive Charge

These charges are applied by the NIE Networks and passed through to the end consumer via the Supplier where appropriate. It is impossible to know advance if Reactive Power charges will occur as it depends on how a site uses electricity and refers to the difference between the electricity supplied and the electricity converted into useful power. This is reflected as a sites Power Factor (PF) is the ratio of working power, measured in kilowatts (kW), to apparent power, measured in kilovolt amperes (kVA). The ideal power factor is unity, or one (1). Anything less than one means that extra power is required to achieve the actual task at hand

Demand Capacity Charge / Maximum Import Capacity

This is the maximum power rating of your supply recorded by the network operator, NIE Networks.

Climate Change Levy (CCL)

This is an HM Treasury determined charge made on taxable energy commodities whereby a Supplier must charge the levy for industrial, commercial, agricultural and public administration sectors. All supplies to domestic users, non-business users and charities are excluded from the levy