We understand how important it is for businesses to get the best possible deal on their energy but, in an industry filled with jargon, acronyms and buzz words, we appreciate that understanding what’s what can be confusing and at times, frustrating.
To help you make sense of the jargon, we sat down with our team of energy consultants to discover the terms which cause the most confusion and have compiled the following glossary.
Power is the rate at which energy is generated or used.
Energy is power sourced from physical or chemical resources, to provide light and heat or to work machines. There are two types of energy – stored (potential) energy and working (kinetic) energy.
Renewable energy is the term given to energy which is produced by converting energy from naturally occurring sources – such as the wind, the sun and sea tides – into energy that people can use. Renewable energy removes our dependence on non-renewable sources like oil, natural gas and coal.
The term Kilo-volt-amperes (kVA) is not well known outside the energy industry and is one of that often causes significant confusion. kVA is a measure of apparent power used to describe the total amount of power being used by a system. 1 kilo-volt-ampere is equal to 1000 volt-ampere: 1kVA = 1000VA. 1 kilo-volt-ampere is equal to 1000 times 1 volt times 1 ampere: 1kVA = 1000⋅1V⋅1A.
Because there’s no one size fits all approach to business energy supply, there are an array of contracts designed to suit the varying demands of businesses. With a fixed contract, you agree to rates and charges upfront. This type of contract is great for budget certainty as there’s no need to calculate budgets around fluctuating energy costs.
Pass-Through contracts are becoming increasingly common. They differ from fully fixed contracts in that only the contract duration and wholesale element of your price is fixed for the entire supply duration. This type of contract allows businesses to take on more risk in exchange for lower costs and enables businesses to benefit if energy costs fall.
Non-commodity costs – also known as third party costs – include other charges on your energy bill which are not for the commodity itself. A breakdown of non-commodity costs can be found below.
Transmission Network Use of System (TNUoS)
These charges recover the cost of installing and maintaining electricity transmission systems in England, Wales, Scotland and offshore. TNUoS covers the cost of transmitting electricity from power stations to grid supply points across the high-voltage, high-volume transmission system.
Distribution Use of System (DUoS)
DUoS charges are levied by the UK’s regional DNOs (Distribution Network Operators) and contribute to the operation, maintenance and development of the UK’s electricity distribution networks. These non-commodity costs also cover the charge of distributing electricity from the national grid to your premises via a local distribution zone.
Balancing Service Use of System (BSUoS)
BSUOS charges represent the costs incurred by the National Grid for their actions in maintaining the balance of demand, quality and security of supply on the network. These are daily charges paid by suppliers and generators based on the amount of energy taken from or supplied to the National Grid in each half-hour Settlement Period
Carbon Reduction Commitment (CRC)
CRC is a mandatory scheme aimed at large public and private sector organisations in the UK. The scheme supports the target to achieve an 80% reduction in UK carbon emissions by 2050 by requiring businesses to purchase allowances for every tonne of carbon they emit (electricity and gas). By improving energy efficiency, businesses can save money and improve their reputation. The CRC is due to be abolished in 2019.
Climate Change Levy (CCL)
The CCL tax was put in place to encourage a reduction in carbon emissions. Every April, this charge is reviewed and increases by a small amount, however this charge will increase when the CRC charge is abolished in 2019.
Capacity Market (CM)
Capacity Market is scheme to secure additional winter capacity from both generators and Demand Side Response providers. Successful bidders receive stable payments in return for commitment to deliver energy when required. This charge is needed to help secure electricity supplies for the future. The subsidy payment for these generators is paid for by electricity consumers on their consumption in the winter period.
Renewables Obligation (RO)
The RO charge was introduced to encourage large-scale renewable electricity generation and help the UK government meet its 2020 target of having 15% of energy generated from renewable sources. It closed to new generators in April 2017 and has been replaced by Feed-in-Tariff Contracts for Difference (FiTCfD).
Feed-in-Tariff Contracts for Difference (FiTCfD)
CfD generators have a contract with the government-appointed Low Carbon Contract Company (LCCC), guaranteeing them a fixed price for their exported electricity. The subsidy payment for these generators is paid for by electricity consumers through their supplier. This scheme has replaced the RO and FiT charges.
FiT is a subsidy scheme introduced in 2010 to support small-scale renewable generation. The subsidy payment for FiT generators is paid for by electricity consumers. The approximate cost increase in 2016/17 was over 10%.
In April 1 2018, Ofgem will introduce a new measure to ensure that half hourly supplies that exceed the assigned available capacity will pay significantly more. The DCP 161 charge is a change to the Distribution Connection and Use of System Agreement (DCUSA). Any businesses incurring excess capacity charges will need to agree a revised impact capacity or take measures to reduce energy demand at peak times.
This is by no means an exhaustive list of terms used in the energy industry but, by providing this glossary of terms, we hope that you have a better understanding of the language used by energy companies.
If you would like any further help understanding the terminology used on your energy contracts or bills, please don’t hesitate to get in touch with one of our very knowledgeable energy consultants who will be more than happy to help.