Third Party Energy Charges Explained

The prices on your energy bills are driven by both the cost of wholesale energy and third-party costs (TPCs).

These include, operator costs, government scheme costs, such as: Feed in Tariffs (FiT), Renewables Obligation (RO), Electricity Market Reform (EMR), Climate Change Levy (CCL) and the cost of purchased energy.

TPCs account for a significant proportion of the overall price you pay for your energy or pence per kilowatt hour. On a typical energy bill TPCs represent approximately 65% of the total electricity costs and around 35% for Gas.

How have third party costs changed?

TPCs have increased year on year and are likely to be more unpredictable as we move towards a greener and decentralised energy supply.

What do I need to consider for me and my business?

TPCs need to be part of your decision-making process when thinking about your energy strategy for the future.

It’s important to know that with some suppliers TPCs are not included in your energy price, instead they choose to pass these charges through as separate items as part of their fixed contracts – making it important to check you’re comparing like for like.

What impacts do we expect from Covid-19?

We expect Covid-19 to lead to increases for some TPCs.

Many of the TPCs have fixed scheme revenues that need to be recovered each year. Due to Coronavirus impact and falling demand, this will mean some of the rates could increase to recover the correct amount of revenue. This is likely to impact bills as the amount payable due to third party costs could increase.

As a business, you can choose to have a fixed contract where these charges will apply at the point you renew and will be included in your renewal quote, or a contract where these charges are “passed through” as separate items to the price of the energy.