Gas and Electricity Network Volatility

What does Network Volatility mean to business energy users?

1. Managing Network Charging Volatility.
Network costs are what suppliers/customers are charged for the transportation of their energy around the country. For gas, this is the cost of transporting gas from the beach to a customer’s meter. For electricity, this is the cost of transporting electricity from its source of generation to a customer’s meter.

Suppliers are billed for network costs on behalf of their customer. The figure that suppliers are charged by Distribution Network Operators (DNOs) and Transmission Owners (TOs) can, and usually do, change each year on 1 April, and sometimes they may vary within year too. These ‘final charges’ are only published shortly before they will change – the notice period varies from around 40 days to 60 days.

In recent years, there have been substantial increases in network costs and significant volatility and variability between regions. This has meant suppliers have not always been able to predict in advance all costs which has led to consumer dissatisfaction.

It is clear that sudden and unexpected and unpredictable prices changes are undesirable for all parties. Debate and discussions will continue in the industry during 2013 as to how best to make these regulated, third party charges more predictable for suppliers and consumers alike.

Viewpoint: Suppliers, including Gazprom Energy, have been pushing Ofgem to take steps to improve the predictability of these charges. In the Energy market we have supported the review of Network Volatility by Ofgem and we have supported changes in the electricity industry which will see network companies publishing regular forecasts of future costs. This will help suppliers factor in costs more accurately and allow customers to assess likely future price changes.

Read more details on Ofgem’s Managing Network Volatility decision on their website.