Regulatory update: Network Charging Compensation Scheme

The UK electricity grid is constantly evolving to accommodate the increasing demand for renewable energy sources. This transition brings about changes in how network charges are calculated, which can impact energy costs for businesses.

The Network Charging Compensation Scheme (NCCS) is a mechanism designed to mitigate the potential for increased network charges that may arise from the transition to a low-carbon electricity system. It aims to ensure a fair and equitable distribution of these costs across different types of electricity users. 

About the Network Charging Compensation Scheme

The Network Charging Compensation Scheme is part of a package of government measures known as British Industry Supercharger (BIS), introduced to help Britain’s Energy Intensive Industries (EIIs) remain competitive in the global market.

Applicable to EIIs, the scheme discounts the cost of Use of System (UoS) charges from April 2024 and will offer them 60% compensation on network charging costs for using the GB electricity grid.

How is the scheme funded?

The scheme’s financial support for Electricity Intensive Industries (EIIs) will be sourced through the EII Support Levy (ESL), a levy imposed on electricity suppliers which will be implemented starting April 2025.

The contribution of each supplier will be calculated based upon their respective market share within the electricity sector. The collected funds will be utilized to offset the network charges incurred by EIIs.

All customers will be charged the ESL from their April 2025 invoices, billed in May 2025.

Who can apply?

Energy Intensive Customers (EIIs) are eligible to claim compensation on network charges incurred from 1st April 2024, subject to holding a valid EII certificate issued by the Department for Business and Trade (DBT).

EIIs are eligible to make applications against the following network charges:

• Transmission Network Use of System (TNUoS), including annual connection charges and transmission losses
• Distribution Use of System (DUoS), including annual connection charges and distribution losses in this context
• Balancing System Use of System (BSUoS)

Applications are made within claim windows, and EII customers are encouraged to submit a claim application within the designated window, as claims can be subsequently adjusted/corrected. At present, Elexon have made no provision for retrospective claims on periods outside the latest claim window.  

Application criteria

Applicants must hold a valid ‘EII certificate’ to receive compensation and reductions from the Government. 

Criteria and applications are set and managed via Gov.uk, summarised below:

• The business must manufacture a product in the UK within an eligible sector (defined by a 4-digit NACE Code) – the “sector level test”.
• The business must pass a 20% electricity intensity test – the “business level test”.
• The business must have at least one quarter of financial data.
• The application must contain evidence of the proportion of electricity used to manufacture the product for a period of at least three months.

A business that successfully applies for the exemption will be issued with a certificate (an “EII certificate”) confirming their eligibility for the CFD, RO, FIT and CM exemption. This will also entitle them to the Network Charging Compensation Scheme.

Successful applicants should then pass their certificate on to their electricity supplier so that they receive the benefit of the exemptions. Please note that electricity suppliers will need to set up the relevant arrangements before they receive, and therefore pass on, the exemptions.

Source “Energy Intensive Industries (EIIs): Guidance for applicants seeking a certificate for an exemption”  

How to apply?

Eligible Energy Intensive Industries (EIIs) will need to register for the scheme online via Elexon’s online portal

The portal enables a company to submit their claim or act on behalf of others to make claims. Only companies deemed eligible by the Department for Business and Trade (DBT) are able to create an account.

Registration Process:

1. Enter a company registration number: Generally, the EII certificate holder – However, a third-party company may act on behalf of others
2. Enter contact details: Name, Email, Telephone (these should be for the initial contact for the NCC scheme) - On submission, Microsoft will email an Entra ID to support multifactor authentication. The Company details can then be setup
3. Primary company email: Up to six email addresses, used to send notifications
4. Postcode & address detail: Enter the postcode and use the find address function
5. Contact details: Claim managers (enter at least two Claim Managers) and director (enter at least one director for the EII holding company)
6. Submit: All submissions are validated by Elexon

Application windows

Submissions are welcome on a quarterly basis within specific application windows. Please review the timeframes below before submitting your application.

Register for the NCC scheme

The Network Charging Compensation Scheme is an important mechanism for mitigating the impact of evolving network charges on electricity users, and SmartestEnergy is committed to leveraging the scheme to secure the best possible outcomes for our customers. By working closely with industry stakeholders and actively participating in the scheme, we aim to ensure a fair and equitable distribution of network costs.