Market Insight Report Third party cost updates

April 2024

Third party costs (TPC) are non-commodity and non-energy charges. Only half of a business energy bill is made up of energy and supplier costs 1. The other half are maintenance costs of the energy infrastructure. This includes security and development which is needed to deliver energy to homes and businesses. There are two types of third-party costs: network and policy.

Network charges

Network charges are charges from network operators for maintaining and developing energy networks. They are regulated by Ofgem.

The charges can be split into:

  • Distribution charges
  • Transmission charges
  • Balancing charges for electricity only

Policy costs

Policy costs are charges from the government to support the transition towards low carbon energy.

Some examples include:

  • Renewable Obligation
  • Contract-for-Difference FiTs
  • Feed-in-Tariffs
  • Capacity Market scheme

There is a lot of transparency about how they are calculated and a longer notice period when it comes to final rates. Each charge varies in terms of what drives changes to costs and when they are published.

It’s not always possible to know all of the policy costs until the charging year is over.

For fixed price contracts, non-commodity charges can be based on estimated rates from the energy supplier.

It’s good practice to be well informed of what you’re paying towards your energy bill. All of these factors come together to contribute to the energy market as we know it as well as supply your energy.

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Additional information

  1. Proprietary data: third party costs (also known as non-commodity costs) are based on portfolio averages for SMEs over the Oct 24-Sep 25 period. Excludes taxes, operating expenses, margins and broker fees.

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