Why fixing non‑commodity costs is a forgotten lever for UK businesses

Why fixing non‑commodity components of the electricity bill can deliver predictable savings that many UK finance directors overlook, especially when commodity prices are volatile.

The hidden volatility in non‑commodity charges

Transmission and distribution charges (TNUoS, DUoS, BSUoS)

Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) charges are calculated on a per‑kilowatt‑hour basis and are adjusted annually by Ofgem to reflect network investment and operating costs. Because they are volume‑linked, any change in demand – whether from a new production line or a shift to electric vehicles – directly alters the bill. The Balancing and Settlement Use of System (BSUoS) charge, introduced in 2022, adds a further layer tied to the system‑wide balancing service, and has risen by roughly 6% each year since its launch.

Reactive power and capacity (RO, CfD)

Reactive power (RO) charges compensate the system for the provision of voltage support. They are applied per kilovolt‑ampere reactive (kVAR) and can fluctuate with the mix of loads and generation on site. Contracts for Difference (CfD) generators also incur a capacity element that is passed through to large consumers who contract directly with generators. Both RO and CfD capacity charges are subject to quarterly review by the regulator and can move independently of wholesale electricity prices.

Policy‑driven levies (FiT, CCL, E11)

The Feed‑in Tariff (FiT) scheme, although largely closed to new entrants, still generates a residual levy on all electricity consumers to fund legacy contracts. The Climate Change Levy (CCL) is a flat rate per kWh that is indexed annually to the Retail Price Index. The Electricity Price Cap (E11), published by Ofgem, sets a maximum unit price for domestic customers but indirectly influences business tariffs through market benchmarking, leading to periodic uplift of the cap‑linked components.

Which components actually change year‑on‑year?

Component	Primary driver of change	Typical annual swing
TNUoS	Network investment, demand growth	±3‑5%
DUoS	Local network upgrades, demand profile	±2‑4%
BSUoS	System balancing costs	±6% (since 2022)
RO	Reactive power demand, power factor	±4‑8%
CfD capacity	Market‑wide capacity scarcity	±5‑10%
FiT levy	Legacy contract roll‑off	±1‑2%
CCL	RPI inflation	±2‑3%
E11‑linked uplift	Ofgem review	±1‑2%

The data show that while commodity price exposure (the wholesale kWh price) can be hedged, the above non‑commodity items move on their own timetable and can add up to a 10‑15% swing in total electricity spend for a typical UK mid‑size manufacturer.

Strategies to fix or pass‑through non‑commodity costs

1. Fixed‑price transmission contracts – Some suppliers offer a capped TNUoS/DUoS rate for a defined period (usually 12‑24 months). By locking the per‑kWh charge, the business removes the volume‑linked volatility.
2. Reactive power hedges – Engaging a specialist provider to supply power factor correction equipment (e.g., capacitor banks) can reduce RO charges by up to 30% and convert a variable cost into a capital‑expenditure decision with a 2‑3 year payback.
3. Capacity‑as‑a‑service – For organisations that contract directly with CfD generators, negotiating a fixed capacity fee rather than a market‑linked one stabilises the cost element.
4. Levy pass‑through clauses – Including CPI‑linked escalation caps for CCL and FiT in supply agreements prevents unexpected spikes.
5. Portfolio‑wide optimisation – Using TUS’s Flex Management platform, which currently oversees more than 150 GWh, companies can aggregate demand across sites and negotiate a single, fixed non‑commodity rate, benefiting from the group’s track record of beating supplier projections by 20% in the last 12 months.

The business case: numbers from the field

A recent TUS case study of a UK food‑processing group (annual electricity spend £12 m) demonstrated the impact of fixing non‑commodity costs:

• Fixed‑price TNUoS/DUoS reduced the variable component from £2.1 m to £1.6 m, a 24% saving.
• Reactive power optimisation cut the RO charge by 35%, delivering a £0.3 m reduction.
• Consolidating levy pass‑through clauses limited CCL inflation to 1.5% p.a. instead of the 3% RPI‑linked rate, saving £0.15 m. Overall, the non‑commodity fixes delivered a £2.1 m (17.5%) reduction in total electricity spend, with a payback of 18 months based on the firm’s cash‑flow profile. The same methodology applied across TUS’s 30+ supplier panel can be replicated for any UK business with a minimum annual spend of £500 k.

Implementation checklist for finance directors

• Map the bill – Break down the latest invoice into commodity vs each non‑commodity line item.
• Benchmark rates – Use Ofgem’s published TNUoS/DUoS tables and the latest CCL rate to identify any over‑payment.
• Set a fixing horizon – Decide which charges to lock for 12‑24 months based on forecast demand stability.
• Engage a specialist – Leverage a provider like TUS that can negotiate fixed‑price contracts across its supplier panel and manage the technical side of reactive power optimisation.
• Monitor annually – Review the fixed rates against regulator updates (e.g., Ofgem’s annual TNUoS review) and re‑negotiate before expiry.

Bottom line

Non‑commodity electricity charges are a silent source of cost drift that can erode profitability even when wholesale prices are hedged. By analysing which components move year‑on‑year and fixing them through negotiated contracts, reactive‑power solutions or levy caps, UK finance directors can secure a more predictable cost base. TUS’s proven flex‑management capability – 150 + GWh under management and a 20% outperformance of supplier forecasts – provides a ready‑made pathway to lock in those savings without sacrificing operational flexibility.