Energy pricing trends - what’s driving the changes in third party costs?
August 2025
While commodity prices are often a focal point in retail energy pricing, it's the third party charges (also known as non-commodity or non-energy charges) that can make up over half of an energy bill when commodity prices are stable.
These charges come in a range of shapes and sizes but are all crucial in funding the safety and security of our energy supply today and in the future.
Energy charges breakdown
Given the number and complexity of these charges, we won’t go into detail in this quarterly report. Instead, we will focus on sharing the most relevant and helpful updates for today’s modern energy customer.
Increasing third party charges
Over the last 15 years, third party charges for electricity have increased seven-fold, and it is unlikely that they will reduce at all in near future. Several factors are driving the increases, including:
- Inflation
- Decreasing national demand
- Preparation for Net Zero
- Government policies and initiatives
Electricity third party costs
As shown in the chart above, internal insights from British Gas business suggest that electricity standing charges are likely to increase steadily in the coming years, as network operators continue to invest in the infrastructure that supports our electricity system.
Third-party unit rates are expected to increase at a more measured pace, as schemes such as the Renewable Obligation (RO) begin to wind down over the next few years.
Recent developments
TNUoS shock
Recently, the electricity supplier community has been focused on Ofgem’s announcement regarding future TNUoS (Transmission Network Use of System) costs.
Ofgem provisionally approved the spending levels for transmission operators over the next five years, as part of the new price control framework set to begin next April.
Across the wider energy market, suppliers are continuing to manage the impact of unprecedented increases in TNUoS costs.
Increased third party charge exemptions
In June, the government announced the British Industrial Competitiveness Scheme as part of the UK’s Modern Industrial Strategy.
The aims are to increase the level of and access to third party charge exemptions for Energy Intensive Industries (EIIs). This will include:
- A new exemption for 7,000 businesses from RO, Feed-in Tariff (FiT) and Capacity Market costs from 2027.
- An increase in the network charge exemption from 60% to 90% of costs from 2026 for around 500 eligible businesses 1.
Looking Ahead
Every energy consumer is different in terms of how they consume their energy and what they are looking for from their energy supply contract.
Suppliers provide a wide range of supply products that range from fixed products that greater offer budget certainty to the more complex pass-through products that provide consumers with greater ability to reduce their energy spend.
Find out what’s available to you and your business today.
In this article
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Renewable energy solutions set new Q2 heights for UK electricity
Sources
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