Aled Humphreys, Director of Business Energy at SSE Energy Solutions, explains what’s happening in the energy market and what it means for customers and their bills.
Many of our customers will have seen and heard news stories over recent weeks highlighting significant falls in wholesale energy prices since the start of the year.
While wholesale gas and electricity prices still remain above the historic norms we became accustomed to before mid-2021, I’m pleased to say we've been able to pass this on to customers in our new variable tariff rate at the start of April. We have written directly to the customers that will benefit from these changes.
Customers who are in the process of fixing new contracts with us will also find that we’re able to offer new rates considerably below those on offer during the height of the market volatility after Russia’s invasion of Ukraine last year.
While falling wholesale prices are contributing to lower unit rates for many of our customers renewing or rolling on to variable contracts, some customers may not see a significant real-term change in the amount they continue to pay. There are several reasons for this.
Firstly, those customers that were eligible for the government’s Energy Bill Relief Scheme (EBRS) support will now receive a lower level of support through the government’s replacement scheme, which begins from 1 April 2023 and lasts until 31 March 2024.
More information on the eligibility criteria and the overall level of support on offer from the new Energy Bills Discount Scheme (EBDS) is available here.
SSE Energy Solutions, alongside other suppliers, is working in partnership with the Department of Energy Security and Net Zero (DESNZ) to finalise the scheme and prepare our systems for implementation.
Secondly, some customers on our fixed Choice contracts will see a slight increase in their unit rate due to an industry regulatory change causing BSUoS (balancing services use of system) charges to increase.
These charges are passed on to suppliers from the company, National Grid, which operates the electricity system. The charges reflect the cost National Grid incurs from taking actions to balance the country’s electricity demand with available electricity generation on a minute-by-minute basis.
In line with the terms of the Choice contract, while commodity charges are fixed for the duration of the contract, we reserve the right to pass on changes in non-commodity costs to customers.
Non-commodity costs have been particularly challenging for suppliers to forecast during the last 18 months of energy market volatility. While we’ve done our best to shield customers from the impacts of this volatility, it’s our duty as a fair and responsible supplier that we pass these increases on to our Choice customers where the charges turn out to be higher than they’re currently paying.
The way costs are recouped for transporting electricity from generation source to demand source is also changing due to new industry regulations as part of Ofgem’s Targeted Charging Review.
Due to the evolving nature of the electricity generation mix, increasing volumes of electricity are travelling longer distances and through more complex routes to reach sources of demand.
To unlock these abundant but more remote energy sources, the country needs to build new and maintain existing cables to transport the electricity generated to areas of higher population density.
From 1 April 2023, an increased share of these transmission costs, known as TNUoS charges, will be passed on to suppliers (including SSE Energy Solutions).
The allocation of fixed transmission costs is changing for many customers. These charges will differ depending on your location, and the band or profile class of your supply point. The band or profile class is allocated to customers based on the size of their connection and annual demand. These costs will be applied to the standing charge, which is a separate line item on the bill, and is a fixed charge per day/month.