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BSUoS charges: Current tariff rates and their impact on electricity bills

BSUoS charges account for approximately 3% of domestic and business electricity prices. These charges cover the National Energy System Operator’s vital role in maintaining balance on the British national grid, ensuring a stable and uninterrupted electricity supply across the country.

This guide explains BSUoS charges, tariff rates, and how they affect energy bills. Below are the key sections of our guide:

• What are BSUoS charges?
• BSUoS charges: Latest and upcoming fixed tariff rates
• Balancing services funded by BSUoS charges
• Rising BSUoS charges
• BSUoS charges for businesses

What are BSUoS charges?

The acronym BSUoS stands for Balancing Services Use of System. BSUoS charges represent the costs associated with the National Energy System Operator (NESO) balancing electricity supply and demand on the national grid.

BSUoS charges are just one type of networking cost incurred in relation to operating and maintaining electricity networks. Other networking costs include:

• TNUoS charges – Recover the cost of building, maintaining and upgrading the high-voltage national grid.
• DUoS charges – Recover the investment in infrastructure made by regional distribution network operators.

Networking costs are incurred by licensed energy suppliers and are then passed on through domestic and business electricity tariffs.

BSUoS charges: Latest and upcoming fixed tariff rates

Unlike other network charges, BSUoS tariffs are straightforward. A single fixed unit rate per kWh applies to all electricity users.

NESO receives BSUoS charges from domestic and business energy suppliers, calculated from energy meter readings for their customers.

The table below shows the current and upcoming BSUoS tariff rates:

Source: NESO – Balancing Services Use of System (BSUoS) charges

Currently, BSUoS tariffs equate to approximately £40 per year for the average British household and contribute around 3% to overall business electricity prices.

💡The fixed unit tariff for BSUoS charges was introduced in April 2023. Previously, BSUoS charges were variable and paid by both generators and consumers.

Balancing services funded by BSUoS charges

The funds raised through BSUoS are used by NESO to support the following five schemes, which are aimed at maintaining system balance and ensuring the reliability of the British national grid.

The Balancing Mechanism

Under the Balancing Mechanism, NESO makes real-time adjustments to the availability of power on the grid by paying the following participants to feed electricity into, or extract electricity from, the system as required:

• Flexible generators, such as the Drax Biomass Power Station, can increase or decrease output on demand.
• Energy storage facilities, including grid-scale batteries and pumped hydro storage, that can charge or discharge electricity on demand.
• Importers and exporters that can sell or buy electricity from the European continent via undersea interconnectors.

Demand flexibility service

The demand flexibility service is a scheme used by NESO to help manage periods of extreme grid stress, when generation is struggling to meet electricity demand.

Under the scheme, businesses and households can receive payments to reduce consumption upon NESO’s request.

Find out more in our guide to how businesses can participate in the demand flexibility service.

Frequency response service

In addition to managing the availability of power, NESO is responsible for maintaining the national grid’s frequency at 50 Hz. Deviations from this frequency could result in widespread failures of electronic equipment.

Through the frequency response service, battery storage facilities can provide automatic, second-by-second imports and exports that help keep the grid’s frequency stable.

The Balance Reserve

NESO is responsible for ensuring there is a reserve of back-up power on the grid to maintain supply during unexpected increases in demand or sudden losses of generation.

Back-up power is funded through the Balance Reserve scheme, under which NESO purchases a power reserve in the day-ahead wholesale electricity market. Generators that are paid under the Balance Reserve must not feed power into the national grid unless instructed to do so by NESO.

Winter security of supply

Since the start of the war in Ukraine, NESO has also been responsible for ensuring contingency fuel supplies during the winter months.

In the event of supply shortages, NESO can:

• Make independent purchases of LNG to provide a backup fuel supply for gas-fired power stations.
• Cover coal procurement costs to enable the activation of coal-fired power stations as an alternative to gas-fired power stations.

Rising BSUoS charges

In 2019, BSUoS charges averaged around 0.6 p/kWh, which is less than half of the current tariff. The cost of balancing the national grid has increased significantly over the past few years.

In this section, we explain the reasons for rising BSUoS charges and outline the government’s initiatives to reduce these costs:

Rising wholesale electricity prices

BSUoS charges fluctuate in line with underlying wholesale electricity prices because balancing the grid requires paying electricity generators to adjust their output, either by providing additional power or by reducing supply. These payments are made at rates closely tied to prevailing market prices.

When wholesale electricity prices rose significantly in 2021 and 2022, NESO’s costs of procuring balancing services also increased.

Decarbonising the grid

The fuel mix of the national grid is evolving as the government and Ofgem work towards the Clean Power 2030 target. The decarbonisation of the grid is making the task of balancing supply and demand more complex and more expensive.

The contribution of wind farms in the UK to electricity generation is steadily increasing as they replace gas power stations.

Unlike gas power stations, which can precisely control their output, wind farm generation is weather-dependent and fluctuates unpredictably, increasing the volume of balancing activities required to maintain grid stability.

Initiatives to reduce balancing costs

To help absorb the growing contribution of intermittent wind generation, the government has subsidised the construction of two large-capacity nuclear power plants, Hinkley Point C and Sizewell C. Nuclear power plants generate stable and reliable electricity, providing a consistent baseload for the grid.

In addition, transmission network providers are investing in significant upgrades to the national grid, known as the Great Grid Upgrade. These upgrades are designed to distribute intermittent power from wind farms more effectively to demand centres, reducing the need for wind curtailment.

BSUoS charges for businesses

BSUoS charges are incurred by all non-domestic properties with an active business electricity connection.

This section summarises how BSUoS charges impact business energy bills and outlines ways to reduce these charges.

How BSUoS charges affect business energy bills

BSUoS charges are incorporated into business electricity bills as follows:

• SMEs – BSUoS charges for SMEs and micro business electricity customers are incorporated into the unit rate per kWh.
• Large businesses – For large businesses, on pass-through tariffs, BSUoS charges are presented separately from wholesale costs on their bills.

Can businesses reduce BSUoS costs?

BSUoS costs are difficult to reduce or avoid for businesses, as these charges are incurred based on business electricity meter readings for each kWh of electricity consumed.

The most effective way to reduce BSUoS costs is to eliminate unnecessary business energy consumption. Visit our page on improving business energy efficiency for practical tips.

For customers not on a pass-through tariff, energy suppliers typically add a margin on top of BSUoS charges. You can find the most competitive tariffs using our business electricity comparison service.

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