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.
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.
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.
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.
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.
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.
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:
We've also put together this useful infographic to help make the nature of these changes clear:
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 0845 230 0011.
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