Ratchet charges

What are they?

A daily metered (DM) gas customer provides a daily consumption standard offtake quantity (SOQ) for each DM meter point (MPRN).

During the winter period, from 1 October to 31 May, if a customer exceeds their nominated SOQ then they will be subject to a penal ratchet charge. 

Impact

• This charge is currently set at twice the annual charge

What does it mean for our customers?

• Between 1 October and 31 May ratchet charges apply
• Ratchet charges impose significant penal charges on customers who exceed the SOQ
• Customers should check their SOQ and ensure it’s sufficient to meet their requirements for this winter.

What are we doing?

We’ve raised Modification 619 to address the penal nature of the ratchet charge. We propose that the multiplier is set to one instead of two. That way, the customer pays for the actual daily capacity used.

We also propose changes to the nature of ratchet from penal charge to a corrective charge.

There have been two alternative modifications raised;

• The first by British Gas which is largely similar to ours except the multiplier is set to 1.1 rather than 1, therefore still slightly penal
• The second has been proposed by Scottish Gas Networks and exempts sites under 73,200 kWh from ratchet charges altogether

Unfortunately on 31 July 2018 Ofgem decided to reject all of the proposals and we’re engaging with them to understand if alternative arrangements can be put in place ahead of this year’s ratchet season.

We've now raised Modifcation 0665 which looks at the introduction of suitable classification of ratchetable supply points and ensuring accurate capacity allocations (SOQ), in hope of addressing the concerns set out in Ofgem's rejection letter. 

How can I find out more?

The proposals that were rejected can be found here:

https://www.gasgovernance.co.uk/0619

And more information on Ratchets can be found here:

https://www.gazprom-energy.co.uk/help-and-support/bills-payments/business-energy-understanding-ratchet-charges/