Gas transportation charges: What’s changing this October?

Stay up-to-date on how changes in the price of gas distribution could affect your business.

30 September 2016

Given the distribution and transmission charges that cover the cost of transporting gas make up approximately 34% of your overall business gas bill, it’s important to keep abreast of any scheduled changes to the overall cost of transporting gas in the UK.

Below, we’ve outlined the gas transportation charges changing from 1 October 2016.

Changes to gas transportation charges

To offer the best possible insight into the proposed changes to gas transportation charges, we spoke to one of our expert Commercial Pricing Analysts, David Carroll, about how and why prices are changing, and what rate changes businesses can expect to see from 1 October.

How are gas transportation charges changing? 

As of 1 October 2016, the NTS Exit Commodity Charge, which is made up of the Transportation Owner and System Operator charges, will decrease by 0.0029p/kWh (7.84%) from 0.0370p/kWh to 0.0341p/kWh. This rate is set and fixed for a six-month period until 31 March 2017, as the NTS Exit Commodity charge changes bi-annually.

What factors affect transportation charges/why do the charges change? 

Before each eight-year price control period, OFGEM approves a base revenue that the gas transporters are allowed to recover during this period. This total allowed revenue is broken down into annual allowed revenues, which are then used to calculate annual transportation charges levied on shippers.

Due to factors such as fluctuations in seasonal normal demand and the state of the UK economy, there is always an under or over recovery in allowed revenue vs. actual revenue. This surplus or deficit is passed through into the following year causing subsequent changes in transportation charges.

Which areas have seen the biggest change in charges? 

As the NTS Exit Commodity Charge is a uniform charge and is levied on all shippers using the transmission network, every user will see the same reduction on 1 October. Distribution charges, which fluctuate by local distribution zone (LDZ), change each year on 1 April. The allowed revenue and under/over recovery methodology is also used for Distribution charging.

Looking to control energy costs? We offer a range of flexible gas contracts for large organisations.

Find out more about what we can do for you

What rate changes can businesses expect to see from October?

Businesses on pass through contracts can expect to see a reduction in their overall transportation commodity charge of 0.0029p/KWh.  The next change in the NTS Exit Commodity Charge will be from 1 April 2017, and will be set and published on 1 February 2017.

Key takeaways

Unsure about what some of this information means? We’ve provided all the facts you need to know about changes to gas transportation charges below:

  • The NTS Commodity Charge will decrease by 0.0029p/kWh on 1 October
  • The new rate will be 0.0341p/kWh, and this is fixed for six months
  • Businesses on pass through contracts can expect to see a reduction in their overall transportation commodity charge of 0.0029p/KWh
  • The NTS Commodity Charge applies to all shippers on the transmission network, so your gas bill will change regardless of where your business is based

We've also put together this useful infographic to help make the nature of these changes clear:

changes to uk gas transportation charges october 2016

How changes to gas transportation charges could affect your bill

To cover the cost of gas transportation, we include these charges within your daily standing charge and gas unit rate. When National Grid and the individual distribution companies change their gas transportation charges, we have to reflect this in the rates that we charge you. We adjust these rates twice a year (in April and October) and, for customers in fixed-term contracts, we will tell you in writing when changes are due to take place. Of course, if you are on a  fixed transportation contract, your rates will not change.

Any changes to transportation charges will be reflected in the ‘Gas Cost’ and ‘Standing Charge’ on your itemised gas energy bill.

For more information on UK gas transportation charges, including a glossary to help you understand certain terms, click here or call our dedicated customer service team on 0161 837 3395

The views, opinions and positions expressed within this article are those of our third party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.

Share this

You may also like...