Pass Through Charges
We are finding that an increasing number of suppliers are choosing to show some Pass Through Charges separately when billing clients. These costs have always been there but have previously always been hidden in either the standing charge, the unit rate, or more commonly a combination of both.
"So why am I seeing Pass Through Charges on my billing now?"
The price you pay your supplier for your energy includes many different components. The largest proportional cost is the actual energy component and the supplier’s cost, which today represents approximately 75-80% of your bill. The remainder is made up of a host of other charges which, as the consumer facing element of the energy industry, the supplier may recharge these other costs in the supply chain.
These include the cost of the Transmission & Distribution Networks (Transportation Charges for Gas), Meter Operator Charges, Pooling & Settlement Charges, and Data Collector & Data Aggregator Charges and other levies such as the Renewables Obligation Charge, the AAHEDC Charge, and the Feed in Tariff. One additional levy which the majority of businesses will already be aware of is of course the Climate Change Levy as this already appears as a separate Pass Through Charge where applicable. Year on year these ‘other’ charges are increasing, and those increases are being imposed on suppliers – and where a supplier might traditionally have absorbed any price rises, they are no longer prepared or able to and as such the increases must be passed on to the end user, sometimes mid contract.
By showing some of these costs as separate pass through charges a supplier is able to easily demonstrate that it is not them increasing their contracted ‘fixed’ energy component price to the client but is instead an increase in cost being forced upon them. Read more about ‘fixed’ energy prices in our article on our website regarding Short Term vs Long Term Contracts under “Are the prices fixed for the duration of the contract”?
Pass Through Charges are something that Torse is monitoring very closely and more advice will follow when a clearer picture emerges of particular supplier billing changes. In the meantime please be prepared for these changes, keep checking our website for updates, and contact us if you have any questions.
Common 'Pass Through' Terms
Energy suppliers are the public face of the supply industry. Part of the role of a supplier therefore entails invoicing charges on behalf of other parties in the supply chain. Some of these charges and their definitions can be seen further below and whilst some already appear on supplier billing, we are likely to see more appearing as separate Pass Through Charges soon:-
Availability Charge (kVA)
Availability or Agreed Capacity refers to the limit of capacity for a site. E.g. if a site has an Availability of 150kVA then maximum demand should not exceed that figure at any time. It is set and charged by the local Distribution Network Operator (DNO), according to the kVA of a premise. This charge covers investment and maintenance of the electricity network. Customers are charged a fee per unit according to the agreed supply capacity for that site. These are sometimes called Capacity Charge or Available Supply Capacity.
Excess Availability Charge
A charge for supply capacity delivered in excess of the Agreed Supply Capacity.
Reactive Power Charge (KVAR)
Reactive power refers to the difference between the electricity supplied and the electricity converted into useful power. If a site has high Reactive Power (there is a large amount of power being wasted) then more current needs to flow to provide the same output. This puts an additional strain on the distribution network operator and contributes towards these costs.
Data Collection Charge
A fee paid to the data collector for determining the energy consumption of the supply.
Data Aggregation Charge
A fee paid to the agent appointed to aggregate the meter reading data which is received from the Data Collectors and subsequently forwarded to the Supplier.
Meter Operation Charge
The meter operation charge is a fee paid to the meter operator for installing and maintaining the meter.
Assistance for Areas with High Electricity Distribution Costs. Previously known as the ‘Hydro Benefit’. The intention of the Scheme is to reduce the costs to consumers of the distribution of electricity in certain areas. The National Grid recovers an Assistance Amount through the Scheme, which is passed to the Relevant Distributor in the Specified Area.
Settlement Agency Fee
Behind the scenes distribution companies, suppliers, metering companies and others need to reimburse, and recover their costs from one another. The UK’s Balancing and Settlement Code Company, called Elexon, maintains the system which governs this activity.
DUos (Distribution Use of System)
This is the cost of running the local distribution network that supplies your site and includes the availability, reactive power and standing charge. The availability Charge, or Capacity Charge as it is sometimes known, is where customers are charged an amount per unit according to the agreed capacity for that site.
TNUoS (Transmission Network Use of System)
This is the costs occurred for installing, maintaining and operating the transmission system.
DLoss (Distribution Loss)
Charges for the energy lost as heat as it travels through the distribution wires.
TLoss (Transmission Loss)
When transmitting electricity from generator to local distribution network areas some electricity is lost. Specific calculations have to be made by suppliers to determine the level of these losses.
CCL (Climate Change Levy)
This is a tax on energy products that are used for lighting, heating and power – the amount you pay is based upon your actual energy consumption( ie. how many kwhs you are billed for).
RO (Renewables Obligation)
This is a fixed amount which is charged by your supplier and goes “into the pot” to subsidise generators of electricity from renewable sources. This subsidy is levied by the suppliers because it is a government requirement.
FiT (Feed in Tariff)
This is a government imposed levy collected from all energy consumers who are supplied by the main energy companies. It was introduced in April 2010 as an incentive paid to businesses and property owners who generate onsite renewable energy.
This is a charge made by the National Grid for the national transport of the shippers’ (a supplier’s) gas through the gas network (National and Regional Transmission system and the low and medium pressure distribution system) to the customer. The transportation charge consists of three elements, which are dependent on the locations of the particular terminal and offtake site: capacity charge; commodity charge; and site charge, and includes: -
- A charge to read your meter.
- A cost that covers the cost of delivering gas to your business based on your demand on the system for the coldest day of the year.
- Charges to cover the fixed costs associated with operating supplier owned above ground storage facilities for liquefied natural gas and propane(not applicable to all customers).
- Pipeline replacement/maintenance