Ofgem Approves BSUoS Price Cap

BSUoS Cost Changes

In December Ofgem approved WACM4 for CMP381 Defer Exceptionally High Winter 2021/22 BSUoS Costs to 2022/2023.

The modification caps Balancing Service Use of System (BSUoS) costs at £20/MWh from 17 January to 31 March 2022, up to a limit of £200mn.

The proposal was raised after BSUoS costs showed marked increases due to notably high gas prices driving up Balancing Mechanism offers from gas generators and tight margins.

BSUoS prices have been significantly higher than National Grid Electricity System Operator forecasts, with the proposer highlighting a £625mn discrepancy between August and November 2021.

Any deferred costs will be spread equally across the 2022-23 financial year, starting on 1 April 2022, with the costs volume-weighted across the day through each settlement period.

If the actual costs of the total deferral are not known by 1 April 2022, i.e. the £200mn cap has not been reached prior to this, the recovery will initially be based on a forecast.

Ofgem considered that approving a £20/MWh cap appropriately reflects the higher end of recent BSUoS costs, and potentially reflects a level that users may not have foreseen.

The regulator also noted that WACMs with a lower £/MWh cap may have caused the scheme to close early and are less likely to perform well. The modification was implemented on 17 January.

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