Third Party and Industry Charges (TPCs) Explained

09Jun
When reviewing your energy bill, it is tempting to focus only on the unit price. But what many businesses do not realise is that over half of your electricity bill is made up of other charges known as Third Party and Industry Charges (TPCs).
These are not controlled by your supplier. Instead, they fund the wider electricity system from the wires that deliver your power to government schemes that support clean energy.
Between 2024–25 and 2025–26, the cost of these charges is expected to rise by around 10%, with TPCs making up approximately 60% of a typical low voltage customer’s bill.
Let us break down what is included.

What Are Third-Party and Industry Charges?

Third-party charges are applied by industry bodies, not energy suppliers. They cover:
  • Use of the electricity networks (local and national),
  • Services to keep the grid stable,
  • Government schemes for reliability and decarbonization.
Your energy supplier collects these costs, but they go to parties like National Grid, Distribution Network Operators (DNOs), and government agencies.

Key TPCs & Forecast Trends

Charge
Purpose
Forecast Trend
DUoS (Distribution Use of System)
Covers the use of local distribution networks
📉 Slight dip, then gradual rise
TNUoS (Transmission Network Use of System)
Pays for use of the national grid
📈 Increasing with investment
BSUoS (Balancing Services Use of System)
Funds real-time grid balancing
📈 Rising due to constraint costs
CM (Capacity Market)
Ensures backup power availability
📈 Generally rising
RO (Renewables Obligation)
Supports large-scale renewable projects
📈 Rising until 2027, then drops
CfD (Contracts for Difference)
Guarantees prices for clean energy generators
📈 Steady increase
EII SL (Energy Intensive Industries Support Levy)
Supports discounts for energy-intensive businesses
➖ Expected to remain stable
CCL (Climate Change Levy)
Tax on business energy use to encourage efficiency
📈 Gradually increasing
NCCS (Network Cost Charge Scheme)
Recovers costs from non-domestic users
📈 Stable to moderate increase

What is Distribution Use of System (DUoS)?

DUoS charges cover the cost of operating and maintaining the local electricity distribution network. These are the wires that bring electricity from the national grid to homes and businesses.

How DUoS is charged

  • DUoS charges are based on the amount of electricity consumed and the time of use. They vary by region and time band (red, amber, green) and are applied to both Half-Hourly (HH) and Non-Half-Hourly (NHH) customers.
  • Charges may be itemised separately or embedded in your unit rate, depending on the contract type.

What is Transmission Network Use of System (TNUoS)?

TNUoS charges are levied to recover the cost of building and maintaining the high-voltage electricity transmission network.

How TNUoS is charged

  • These charges are based on demand during national peak periods, with different rates by region.
  • TNUoS costs can be included in the unit rate or passed through as a separate charge, primarily for HH customers.

What is Balancing Services Use of System (BSUoS)?

BSUoS charges cover the cost of balancing the electricity system making sure supply matches demand on a second-by-second basis.

How BSUoS is charged

  • Calculated daily based on the system’s needs, BSUoS is a dynamic charge that can fluctuate significantly.
  • It is generally applied as a pass-through cost for HH (Half Hourly) customers and may not be visible for NHH (Non-Half Hourly) contracts if included in the rate.

 

What is the Capacity Mechanism (CM)?

CM is an Electricity Market Reform (EMR) mechanism to help the UK meet its carbon reduction targets and ensure security of electricity supply. It ensures there’s enough capacity available to meet demand by procuring backup power through annual auctions four years and one year ahead of delivery. The costs are passed on to consumers.

How is CM charged? CM is made up of two elements:

  • Obligation Costs: Charged during the winter peak period (16:00 to 19:00 on working days between November and February). An Estimated Annual Consumption Volume (EACV) is used to forecast costs.
  • Operational Costs: The running costs set by the Electricity Settlement Company (ESC), applied monthly and reconciled annually.

 

What is Contracts for Difference (CfD)?

CfD is another EMR mechanism aimed at driving investment in new low-carbon generation. It guarantees a fixed price (the ‘strike price’) for generators, topping up any shortfall from the wholesale market. Costs vary each year depending on energy production and market prices.

How CfD is charged

  • Supplier Obligation Cost: Reflects subsidies paid to low-carbon generators.
  • Operational Cost Levy: Covers scheme admin, set by the Low Carbon Contracts Company (LCCC).
Charges are based on each MPAN’s consumption and reconciled with actuals according to the Settlement Calendar.

What is the Renewables Obligation (RO)?

RO supports large-scale renewable generation. Though it closed to new projects in 2017, existing contracts run through to 2027. It is funded by suppliers and ultimately paid for by consumers.
How RO is charged
  • Charged as either a pass-through item or embedded in unit rates.
  • Forecasts are based on the Buy Out Price and expected obligation levels, and reconciled after any mutualisation.

What is the Feed-in Tariff (FIT)?

FIT was introduced to support small-scale renewable energy (e.g. solar panels). Though closed to new applicants since 2019, existing projects still receive payments.

How FIT is charged

  • Charges can be passed through or embedded in the unit rate.
  • For pass-through contracts, costs are estimated and then reconciled based on actuals after the financial year ends.

What is the Climate Change Levy (CCL)?

CCL is a government tax on non-domestic energy use, aimed at encouraging energy efficiency and reducing emissions.

How CCL is charged

  • Applied per kWh of electricity or gas used.
  • Rates differ for electricity and gas and are updated annually.
  • Certain exemptions apply, such as for domestic use, charities, or small users. Reduced rates require submission of a PP11 certificate.

What is the Network Charging Compensation Scheme (NCCS)?

The NCCS is a newer mechanism introduced by the UK government to support Energy Intensive Industries (EIIs). It provides financial compensation to help these businesses remain competitive amid rising network costs.

How NCCS is charged

  • Costs are recovered from suppliers and passed on to all customers as a levy. These charges may be itemised or embedded in unit rates depending on the supplier contract.
Understanding these charges is key to gaining visibility into your energy spend and identifying opportunities for cost control. At Ecotilities, we are here to help you stay informed and manage your energy more efficiently.