Changes to DUoS
Published: 01/05/2024
4 minute read
Welcome to our Distribution Charges blog, where we'll be looking into changes to the Distribution Use of System (DUoS) charges for 2024 and 2025 and what these mean for consumers. With rates for 2025 published at the end of last year, significant changes as to how these costs are recovered are on their way.
Nick Tyson, Forecast Manager here at TotalEnergies breaks down what these charges are and what we can expect in the coming months.
Nick also joined Future Net Zero to discuss DUoS reforms, the way the energy networks operate and what the increase in demand as we transition to net zero means for the network and for consumers.
What are DUoS charges?
Distribution Use of System (DUoS) charges are how Distribution Network Operators (DNO) recover costs associated with running the network. These costs include maintenance, repairing and investment into each region of the network. These form part of your overall electricity bill and contribute approximately 10% to the total cost to the electricity price so has significant impact on consumers. Recently the recovery of these costs has become more noticeable as a larger portion of the cost is now collected via a daily standing charge. Forecasting DUoS has also become increasingly challenging due to the number of direct and indirect changes that are feeding into the future rates.
Note: When referring to 'revenue', this is the amount of regulated income distribution networks are allowed to recover from users of the network!
DUoS charges
Did you know...DUoS charges are changing.
Watch our quick video for a recap on what's been happening with DUoS charges over the last few years...and what changes are due!
Do you know what your Maximum Import Capacity is?
The past...2022 to 2023
The DUoS charges for 2022/2023 introduced the implementation of the 2019 Targeted Charging Review (TCR) reforming the way network revenues are collected within DUoS charges, moving a larger proportion of the cost away from unit rates and into a fixed daily standing charge.
The DUoS revenue collection can be thought of as being allocated in two pots, the first being for 'Forward Looking' (charging signals such as Capacity and Red, Amber and Green) and the second pot is 'Residual' revenue (Standing Charges). Once the proportioned allowed revenue has been allocated to the Forward Looking charges, the remaining, or Residual revenue will collect solely by pot 2.
The Present
DUoS charges are published by each network 15 months in advance of the charge taking affect, with the 2024/2025 charges published at the end of December 2022. The networks are permitted by Ofgem to increase and correct their allowed collectable revenues with additional costs such as inflation. Unfortunately, due to the energy crisis and economic inflationary shocks that occurred during this time we saw network allowed revenue rise significantly.
In the 2024/2025 charges, this is especially true to the DUoS daily standing charges where the majority of the extra 'top up' revenue is collected.
The Future...more change
The 2025/2026 charges were published in December 2023, and we have seen further changes to DUoS charges. Generally, revenues have reduced for most regions due to a revised forecast of inflation and increased tax allowances, however the methodology of how this revenue is distributed has again been tweaked and will have noticeable impacts to consumers.
The time a change was introduced due to the removal of connection costs to users associated with network reinforcement (Access SCR). Further down the line this has altered the distribution charging methodology to increase the amount of revenue required for Forward Looking charges (pot 1). In 2025/2026 due to this increase it resulted in less top up revenue being left over to fall into Residual pot 2. Therefore, this has increased the size of unit-based charges, especially noticeable in the DUoS Capacity Charge and has significantly reduced DUoS standing charges.
Access SCR (Settlement Code Review)
The Access SCR reform is still on going so it's very likely that we will see further changes to the way the industry designs and collects its revenue via Forward Looking charges in the near future.
Final thoughts...
The 2025/2026 charging year returns consumers to a charging environment where they can be more proactive towards some of their distribution costs. Capacity and Excess capacity costs will increase significantly for this period, so it's important to make sure that consumers are aware of their Maximum Import Capacity (KvA) and if this is appropriate for their usage so they're not overpaying or being exposed to higher Excess Capacity charges unnecessarily.
Keep an eye on our BLOG pages for further updates as we'll be bringing you more industry insights and regulatory updates as we get them!