Why fixing non‑commodity costs is a forgotten lever for UK businesses
Finance directors and operations leaders often focus on commodity price volatility, overlooking the non‑commodity charges that can erode savings year on year. Understanding which components – such as TNUoS, DUoS, RO and others – actually fluctuate, and where fixing them adds value, is essential for a robust procurement strategy.
The hidden cost of non‑commodity charges
In most energy procurement discussions the headline is the kWh price, but the real bill is built on a raft of non‑commodity charges that sit on top of the commodity rate. For a UK business on a flex or multi‑purchase agreement, those charges can account for 30‑45% of the total invoice. The thesis is simple: if you ignore the volatility in non‑commodity components you leave money on the table, and you expose the organisation to unexpected cost spikes that undermine any commodity‑price win.
Which non‑commodity components really move year‑on‑year
Transmission Network Use of System (TNUoS)
TNUoS is a capacity‑based charge set by the regulator (Ofgem) and reflects the cost of using the high‑voltage transmission network. It is reviewed annually in the RIIO‑T2 price control and can change by up to 10% year‑on‑year depending on network investment needs.
Distribution Use of System (DUoS) and Balancing Services Use of System (BSUoS)
DUoS charges are set by the Distribution Network Operators (DNOs) and are indexed to the Retail Price Index (RPI) with a capped uplift of 5% per annum. BSUoS, introduced under the Capacity Market, is a separate balancing charge that can vary with system stress and has shown swings of 3‑8% in the last three years.
Reactive Power (RO) and System Services
The Reactive Power (RO) charge reflects the cost of providing voltage support and is linked to the amount of reactive power a customer draws. It is a usage‑based charge and can rise sharply during periods of high network utilisation, typically 5‑12% year‑on‑year.
Feed‑in Tariff (FiT) and Contracts for Difference (CfD)
Both FiT and CfD are policy‑driven mechanisms that affect the net price of renewable generation. While the headline rates are fixed for the contract term, the settlement price can fluctuate with the market reference price, leading to an effective cost variation of up to 15% for businesses that have on‑site generation or are purchasing renewable‑certified electricity.
Climate Change Levy (CCL)
CCL is a flat rate tax on non‑domestic electricity consumption. It is reviewed annually and can be adjusted by the Treasury. Recent adjustments have ranged between 2% and 6%.
Energy Efficiency Obligation (E11) and Other Regulatory Charges
The E11 levy, part of the Energy Savings Opportunity Scheme, is applied to large energy users and can vary with the overall scheme funding level. Historically it has moved between 1% and 4% of the total bill.
Fixing versus passing through – where the lever is strongest
Fixed‑price contracts for network charges
A growing number of suppliers now offer contracts that lock in TNUoS, DUoS and BSUoS for the duration of the agreement. By fixing these charges, a business can smooth cash‑flow and protect against the RPI‑linked uplift that would otherwise hit the balance sheet each year.
Volume‑based hedging for reactive power
Because RO is usage‑driven, the most effective mitigation is to reduce reactive power demand through power factor correction equipment. Where that is not feasible, a volume‑based hedge – agreeing a capped RO rate for a defined kVArh band – can provide certainty.
Renewable‑generation settlement hedges
For firms with on‑site solar or wind, fixing the settlement price of FiT or CfD via a renewable‑energy‑price‑hedge (REPH) removes the exposure to market reference price swings. TUS’s flex‑management platform has already overseen more than 150 GWh of such arrangements, beating supplier projections by 20% in the last 12 months.
CCL and E11 pass‑through considerations
CCL is a statutory tax and cannot be fixed, but it can be budgeted for with a simple inflation‑adjusted forecast. E11, however, can be negotiated as part of a broader procurement package – some suppliers bundle a fixed E11 contribution into the overall price, effectively turning a variable levy into a predictable cost.
The role of flex management and supplier panels
TUS operates a 30‑plus supplier panel that gives clients access to competitive fixed‑price offers across the full suite of non‑commodity charges. By aggregating demand, the panel can negotiate caps on TNUoS and DUoS that are typically 5‑10% lower than the standard market rates. The platform’s free portal, Yolk, also provides real‑time visibility of each charge component, enabling finance teams to spot anomalies early and trigger renegotiations before the annual price review.
Practical steps for finance directors and operations leaders
- Map your current bill – Use Yolk to break down the invoice into commodity and each non‑commodity component.
- Identify volatility drivers – Look at the historical change percentages for TNUoS, DUoS, RO, FiT, CfD, BSUoS, CCL and E11 over the past three years.
- Set a fixing strategy – Prioritise fixing TNUoS, DUoS and BSUoS where the uplift potential exceeds 4% per annum. Consider volume‑based hedges for RO and settlement hedges for renewable mechanisms.
- Leverage the supplier panel – Invite at least three panel suppliers to submit fixed‑price proposals that include the targeted non‑commodity charges.
- Monitor and adjust – Review the Yolk dashboard quarterly; if any charge deviates from the agreed cap by more than 2%, engage the supplier to remediate.
Bottom line
Non‑commodity charges are a predictable, yet often overlooked, source of cost drift for UK businesses on flex or multi‑purchase agreements. By fixing the most volatile components – TNUoS, DUoS, BSUoS and, where feasible, RO and renewable settlement prices – you protect cash‑flow and ensure that commodity‑price wins translate into real bottom‑line savings. Leveraging TUS’s flex‑management expertise and its extensive supplier panel makes the fixing process both transparent and cost‑effective.
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