Temporary cap on balancing charges given green light by Ofgem

The £40/MWh cap will apply until April 2023

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The energy regulator has approved a temporary cap on balancing charges.

The measure is expected to protect customers and businesses by offsetting the impact of rising costs amid the energy crisis.

Balancing Services Use of System (BSUoS) charges are the means by which National Grid Electricity System Operator recovers the costs associated with balancing the electricity transmission system.

In its decision, Ofgem said: “We accept that 2022 Balancing Services Use of System (BSUoS) costs are significantly higher at present than in previous years and that they are expected to increase over the coming winter period.

“We do not, however, believe that high BSUoS costs alone would warrant intervention measures such as a cap and a deferral.

“We consider that it is proportionate only to identify and cap exceptional BSUoS costs, noting that BSUoS has historically been a volatile charge, increasing at certain points within the year or as a result of specific market conditions.”

Ofgem recommends a BSUoS cap to be implemented this winter, with charges above the cap deferred to the 2023/24 charging year.

The regulator has concluded that a £40/MWh cap is more likely to provide better protection.