CUSC Section 14 Charging Methodologies v1.48a (01 April 2026)

CUSC v1.48a Page 1 of 149 V1.48a 01 April 2026 CUSC - SECTION 14 CHARGING METHODOLOGIES CONTENTS 14.1 Introduction Part I -The Statement of the Connection Charging Methodology 14.2 Principles 14.3 The Calculation of the Basic Annual Connection Charge for an Asset 14.4 Other Charges 14.5 Connection Agreements 14.6 Termination Charges 14.7 Contestability 14.8 Asset Replacement 14.9 Data Requirements 14.10 Applications 14.11 Illustrative Connection Charges 14.12 Examples of Connection Charge Calculations 14.13 Nominally Over Equipped Connection Sites Part 2 -The Statement of the Use of System Charging Methodology Section 1 – The Statement of the Transmission Use of System Charging Methodology; 14.14 Principles 14.15 Derivation of Transmission Network Use of System Tariff 14.16 Derivation of the Transmission Network Use of System Energy Consumption Tariff and Short Term Capacity Tariffs 14.17 Demand Charges 14.18 Generation Charges 14.19 Data Requirements 14.20 Applications 14.21 Transport Model Example CUSC v1.48a Page 2 of 149 V1.48a 01 April 2026 14.22 Illustrative Calculation of Boundary Sharing Factors (BSFs) and Shared / Not-Shared incremental km 14.23 Example: Calculation of Zonal Generation Tariffs and Charges 14.24 Example: Calculation of Zonal Demand Tariff 14.25 Reconciliation of Demand Related Transmission Network Use of System Charges 14.26 Classification of parties for charging purposes 14.27 Transmission Network Use of System Charging Flowcharts 14.28 Example: Determination of The Company’s Forecast for Demand Charge Purposes 14.29 Stability & Predictability of TNUoS tariffs Section 2 – The Statement of the Balancing Services Use of System Charging Methodology 14.30 Principles 14.31 Calculation of the Daily Balancing Services Use of System Charges 14.32 Settlement of BSUoS Schedule 1 - Calculation of charges that fall within the Connection Exclusion EU Regulation 838/2010 CUSC v1.48a Page 3 of 149 V1.48a 01 April 2026 CUSC - SECTION 14 CHARGING METHODOLOGIES 14.1 Introduction 14.1.1 This section of the CUSC sets out the statement of the Connection Charging Methodology and the Statement of the Use of System Methodology CUSC v1.48a Page 4 of 149 V1.48a 01 April 2026 Part 1 - The Statement of the Connection Charging Methodology 14.2 Principles Costs and their Allocation 14.2.1 Connection charges enable The Company to recover, with a reasonable rate of return, the costs involved in providing the assets that afford connection to the National Electricity Transmission System. 14.2.2 Connection charges relate to the costs of assets installed solely for and only capable of use by an individual User. These costs may include civil costs, engineering costs, and land clearance and preparation costs associated with the connection assets, but for the avoidance of doubt no land purchase costs will be included. 14.2.3 Connection charges are designed not to discriminate between Users or classes of User. The methodology is applied to both connections that were in existence at Vesting (30 March 1990) and those that have been provided since. Connection/Use of System Boundary 14.2.4 The first step in setting charges is to define the boundary between connection assets and transmission system infrastructure assets. 14.2.5 In general, connection assets are defined as those assets solely required to connect an individual User to the National Electricity Transmission System, which are not and would not normally be used by any other connected party (i.e. “single user assets”). For the purposes of this Statement, all connection assets at a given location shall together form a connection site. 14.2.6 Connection assets are defined as all those single user assets which: a) for Double Busbar type connections, are those single user assets connecting the User’s assets and the first transmission licensee owned substation, up to and including the Double Busbar Bay; b) for teed or mesh connections, are those single user assets from the User’s assets up to, but not including, the HV disconnector or the equivalent point of isolation; c) for cable and overhead lines at a transmission voltage, are those single user connection circuits connected at a transmission voltage equal to or less than 2km in length that are not potentially shareable. 14.2.7 Shared assets at a banked connection arrangement will not normally be classed as connection assets except where both legs of the banking are single user assets under the same Bilateral Connection Agreement. 14.2.8 Where customer choice influences the application of standard rules to the connection boundary, affected assets will be classed as connection assets. For example, in England & Wales NGET does not normally own busbars below 275kV, where The Company and the customer agree that NGET will own the busbars at a low voltage substation, the assets at that substation will be classed as connection assets and will not automatically be transferred into infrastructure. CUSC v1.48a Page 5 of 149 V1.48a 01 April 2026 14.2.9 The design of some connection sites may not be compatible with the basic boundary definitions in 14.2.6 above. In these instances, a connection boundary consistent with the principles described above will be applied. CUSC v1.48a Page 6 of 149 V1.48a 01 April 2026 14.3 The Calculation of the Basic Annual Connection Charge for an Asset Pre and Post Vesting Connections 14.3.1 Post Vesting connection assets are those connection assets that have been commissioned since 30 March 1990. Pre Vesting connection assets are those that were commissioned on or before the 30 March 1990. 14.3.2 The basic connection charge has two components. A non-capital component, for which both pre and post vesting assets are treated in the same way and a capital component for which there are slightly different options available for pre and post vesting assets. These are detailed below. Calculation of the Gross Asset Value (GAV) 14.3.3 The GAV represents the initial total cost of an asset to the transmission licensee. For a new asset it will be the costs incurred by the transmission licensee in the provision of that asset. Typically, the GAV is made up of the following components: Construction Costs - Costs of bought in services Engineering - Allocated equipment and direct engineering cost Interest During Construction – Financing cost Liquidated Damages Premiums - Premium required to cover Liquidated Damages if applicable. Some of these elements may be optional at the User’s request and are a matter of discussion and agreement at the time the connection agreement is entered into. 14.3.4 The GAV of an asset is re-valued each year normally using one of two methods. For ease of calculation, April is used as the base month. • In the Modern Equivalent Asset (MEA) revaluation method, the GAV is indexed each year with reference to the prevailing price level for an asset that performs the same function as the original asset; • In the Transmission Owner Price Index (TOPI) revaluation method, the original cost of an asset is indexed each year by the TOPI formula set out in paragraph 14.3.6. For Pre Vesting connection assets commissioned on or before 30 March 1990, the original cost is the 1996/97 charging GAV (MEA re-valued from vesting). The original costs of Post Vesting assets are calculated based on historical cost information provided by the transmission licensee’s. 14.3.5 In the MEA revaluation method, the MEA value is based on a typical asset. An MEA ratio is calculated to account for specific site conditions, as follows: • The outturn GAV (as calculated in paragraph 14.3.4 above) is re-indexed by TOPI to the April of the Financial Year the Charging Date falls within; • This April figure is compared with the MEA value of the asset in the Financial Year the Charging Date falls within and a ratio calculated; • If the asset was commissioned at a Connection Site where, due to specific conditions, the asset cost more than the standard MEA value, the ratio would be greater than 1. For example, if an asset cost 10% more to construct and CUSC v1.48a Page 7 of 149 V1.48a 01 April 2026 commission than the typical asset the MEA ratio would be 1.1. If, however, the asset was found only to cost 90% of the typical MEA value the ratio would be 0.9; • The MEA ratio is then used in all future revaluations of the asset. The April GAV of the asset in any year is thus the current MEA value of the asset multiplied by the ratio calculated for the Financial Year the Charging Date falls within. 14.3.6 The TOPI revaluation method is as follows: • The outturn GAV (as calculated in paragraph 14.3.4 above) is re-indexed by TOPI to the April of the Financial Year the Charging Date falls within. This April GAV is thus known as the Base Amount; • The Base Amount GAV is then indexed to the following April by using the TOPI formula used in the Transmission Owner’s Price Control. April GAVs for subsequent Financial years are found using the same process of indexing by TOPI. i.e. GAVn = GAVn-1 * TOPIn • TOPI calculation for year n is as follows: Calculation of Net Asset Value 14.3.7 The Net Asset Value (NAV) of each asset for year n, used for charge calculation, is the average (mid year) depreciated GAV of the asset. The following formula calculates the NAV of an asset, where An is the age of the asset (number of completed Financial Years old) in year n: 14.3.8 In constant price terms an asset with an initial GAV of £1m and a depreciation period of 40 years will normally have a NAV in the year of its commissioning of £0.9875m (i.e. a reduction of 1.25%) and in its second year of £0.9625m (i.e. a further reduction of 2.5% or one fortieth of the initial GAV). This process will continue with an annual reduction of 2.5% for each year of the asset's life. Capital Components of the Connection charge for Post Vesting Connection Assets 14.3.9 The standard terms for a connection offer will be: • 40 year life (with straight line depreciation); • TOPI indexation 14.3.10 In addition a number of options exist: • a capital contribution based on the allocated GAV at the time of commissioning will reduce capital. Typically a capital contribution made in advance of or at the time of commissioning will include costs to cover the elements outlined below and charges are calculated as set out in the equations below; Period on Depreciati 0.5) A ( Period on Depreciati * GAV NAV n n n + − = CUSC v1.48a Page 8 of 149 V1.48a 01 April 2026 − Construction costs − Engineering costs (Engineering Charge x job hours) − Interest During Construction (IDC) − Return element (6%) − Liquidated Damages Premium (LD) (if applicable) General Formula: Capital Contribution Charge = (Construction Costs + Engineering Charges) x (1+Return %) + IDC + LD Premium • The MEA and TOPI revaluation methods are described further in 14.3.21. As an example, we will assume MEA revaluation is a 7.5% rate of return, AND 6% on the TOPI revaluation basis; • annual charges based on depreciation periods other than 40 years; • annuity based charging; • indexation of GAVs based on principles other than MEA revaluation and TOPI indexation. No alternative forms of indexation have been employed to date. 14.3.11 For new connection assets, should a User wish to agree to one or more of the options detailed above, instead of the standard connection terms, the return elements charged by the transmission licensee may also vary to reflect the re-balancing of risk between the transmission licensee and the User. For example, if Users choose a different indexation method, an appropriate rate of return for such indexation method will be derived. 14.3.12 A User can choose to make a capital contribution based on the allocated and depreciated NAV of a commissioned asset. For a capital contribution to take account at the start of Financial Year n, the User may, at most once per year, make a full or partial capital contribution of at least 10% of the NAV prevailing as of 31st March in year n-1. The User shall notify The Company of the capital contribution amount no later than 1st September in year n-1, and pay the capital contribution 45 days prior to the start of Financial Year n which will be applied to the NAV prevailing at the start of year n. As the capital component of the connection charge for year n will reduce as a result of the capital contribution, a reduced rate of return element will be payable and a lower security requirement will be required in Financial Year n and subsequent years. Capital Components of the Connection charge for Pre Vesting Connection Assets 14.3.13 The basis of connection charges for GB assets commissioned on or before 30 March 1990 is broadly the same as the standard terms for connections made since 30 March 1990. Specifically charges for pre vesting connection assets are based on the following principles: • The GAV is the 1996/97 charging GAV (MEA re-valued from vesting) subsequently indexed by the same measure of TOPI as used in the Transmission Owner’s Price Control; • 40 year life (with straight line depreciation); • 6% rate of return CUSC v1.48a Page 9 of 149 V1.48a 01 April 2026 14.3.14 Pre-vesting 1996 MEA GAVs for Users’ connection sites are available from The Company on request from the Charging Team. Non-Capital Components - Charging for Maintenance and Transmission Running Costs 14.3.15 The non-capital component of the connection charge is divided into two parts, as set out below. Both of these non-capital elements will normally be identified in the charging appendices of relevant Bilateral Agreements. Part A: Site Specific Maintenance Charges 14.3.16 This is a maintenance only component that recovers a proportion of the costs and overheads associated with the maintenance activities conducted on a site-specific basis for connection assets of the transmission licensees. 14.3.17 Site-specific maintenance charges will be calculated each year based on the forecast total site specific maintenance for NETS divided by the total GAV of the transmission licensees NETS connection assets, to arrive at a percentage of total GAV. For 2010/11 this will be 0.52%. For the avoidance of doubt, there will be no reconciliation of the site-specific maintenance charge. Part B: Transmission Running Costs 14.3.18 The Transmission Running Cost (TRC) factor is calculated at the beginning of each price control to reflect the appropriate amount of other Transmission Running Costs (rates, operation, indirect overheads) incurred by the transmission licensees that should be attributed to connection assets. 14.3.19 The TRC factor is calculated by taking a proportion of the forecast Transmission Running Costs for the transmission licensees (based on operational expenditure figures from the latest price control) that corresponds with the proportion of the transmission licensees’ total connection assets as a function of their total business GAV. This cost factor is therefore expressed as a percentage of an asset's GAV and will be fixed for the entirety of the price control period. The currently applicable TRC factor, calculated as above, is detailed in the Statement of Use of System Charges which is available from the Website. 14.3.20 To illustrate the calculation, the following example uses the average operating expenditure from the published price control and the connection assets of each transmission licensee expressed as a percentage of their total system GAV to arrive at the 2010/11 GB TRC value of 1.45%: Example: Connection assets as a percentage of total system GAV for each TO: Scottish Power Transmission Ltd 15.1% Scottish Hydro Transmission Ltd 8.6% NGET 12.5% Published current price control average annual operating expenditure (£m): Scottish Power Transmission Ltd 29.1 Scottish Hydro Transmission Ltd 11.3 CUSC v1.48a Page 10 of 149 V1.48a 01 April 2026 NGET 295.2 Total GB Connection GAV = £2.12bn GB TRC Factor = (15.1% x £29.1m + 8.6% x £11.3m + 12.5% x £295.2m) / £2.12bn GB TRC Factor = 1.99% Net GB TRC Factor = Gross GB TRC Factor – Site Specific Maintenance Factor* Net GB TRC Factor = 1.99% - 0.54% = 1.45% * Note – the Site Specific Maintenance Factor used to calculate the TRC Factor is that which applies for the first year of the price control period or in this example, is the 2007/8 Site Specific Maintenance Factor of 0.54%. The Basic Annual Connection Charge Formula 14.3.21 The charge for each connection asset in Financial Year n can be derived from the general formula below. This is illustrated more fully by the examples in Appendix 2: Examples of Connection Charge Calculations. Annual Connection Chargen = Dn (GAVn) + Rn (NAVn) + SSFn (TOPIGAVn) + TCn (GAVn) Where: For n = year to which charge relates within the Depreciation Period n = year to which charge relates GAVn = GAV for year n re-valued by relevant indexation method TOPIGAVn = GAV for year n re-valued by TOPI indexation NAVn = NAV for year n based on re-valued GAVn Dn = Depreciation rate as percentage (equal to 1/Depreciation Period(typically 1/40 = 2.5% of GAV) Rn = For assets subject to TOPI indexation, the real pre-tax Weighted Average Cost of Capital for the Relevant Transmission Licensee for year n (WACCn). For asset subject to MEA indexation, the real pre-tax Weighted Average Cost of Capital for the Relevant Transmission Licensee for year n (WACCn) plus 1.5 percentage points. Where for the year n: 𝑊𝐴𝐶𝐶𝑛= ((𝑟𝑒𝑎𝑙 𝑝𝑜𝑠𝑡 𝑡𝑎𝑥 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑒𝑞𝑢𝑖𝑡𝑦 1 −𝑐𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑖𝑜𝑛 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒) × (1 −𝑛𝑜𝑡𝑖𝑜𝑛𝑎𝑙 𝑔𝑒𝑎𝑟𝑖𝑛𝑔 %)) + (𝑟𝑒𝑎𝑙 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑑𝑒𝑏𝑡 × 𝑛𝑜𝑡𝑖𝑜𝑛𝑎𝑙 𝑔𝑒𝑎𝑟𝑖𝑛𝑔 %) And where for the calculation of WACCn: The real post-tax cost of equity, notional gearing %, real cost of debt and the corporation tax rate, are as specified in the latest published Ofgem Price Control Financial Model (PCFM) CUSC v1.48a Page 11 of 149 V1.48a 01 April 2026 relating to year n, or should Ofgem fail to publish or cease to publish a PCFM, those specified in the latest public regulatory determination(s) or decision(s) should be used. SSFn = Site Specific Factor for year n as a % (equal to the Site Specific Cost/Total Site GAV) TCn = Transmission Running Cost component for year n (other Transmission Owner Activity costs). For n = year to which charge relates beyond the Depreciation Period n = year to which charge relates GAVn = GAV for year n re-valued by relevant indexation method TOPIGAVn = GAV for year n re-valued by TOPI indexation NAVn = 0 Dn = 0 Rn = 0 SSFn = Site Specific Factor for year n as a % (equal to the Site Specific Cost/Total Site GAV) TCn = Transmission Running cost component for year n (other Transmission Owner Activity costs). 14.3.22 Note that, for the purposes of deriving asset specific charges for site-specific maintenance, the TOPI re-valued GAV is used. This is to ensure that the exact site charges are recovered from the assets at the site. The site costs are apportioned to the assets on the basis of the ratio of the asset GAV to total Site GAV. Adjustment for Capital Contributions 14.3.23 If a User chooses to make a 100% capital contribution (either pre-commissioning or post-commissioning) to The Company towards their allocation of a connection asset then no capital charges will be payable and hence the connection charges for that asset would be calculated as follows: Annual Connection Chargen = SSFn (TOPIGAVn) + TCn (GAVn) 14.3.24 If a User chooses to make a partial capital contribution(s) (either pre-commissioning or post-commissioning) to The Company towards their allocation of a connection asset, for example PCCF = 50%, then the connection charges for that asset would be calculated as follows: Annual Connection Chargen = Dn (GAVn*PCCF) + Rn (NAVn*PCCF) + SSFn (TOPIGAVn) + TCn (GAVn) PCCF = Partial Capital Contribution Factor taking into account a capital contribution made pre-commissioning compared to the GAV (as outlined in 14.3.10), and any capital contributions made post-commissioning compared to the appropriate NAV (as outlined in 14.3.12) as appropriate. Modification of Connection Assets 14.3.25 Where a modification to an existing connection occurs at the User’s request or due to developments to the transmission system, their annual connection charges will CUSC v1.48a Page 12 of 149 V1.48a 01 April 2026 reflect any additional connection assets that are necessary to meet the User's requirements. Charges will continue to be levied for existing assets that remain in service. Termination charges as described in Chapter 5 below will be charged for any existing connection assets made redundant as a result of the modification. CUSC v1.48a Page 13 of 149 V1.48a 01 April 2026 14.4 Other Charges 14.4.1 In addition to the basic annual connection charges set out above, the User may pay The Company for certain other costs related to their connection. These will be set out in the Bilateral and Construction Agreements where appropriate and are described below. One-off Works 14.4.2 To provide or modify a connection, the transmission licensee may be required to carry out works on the transmission system that, although directly attributable to the connection, may not give rise to additional connection assets. These works are defined as “one-offs”. Liability for one-off charges is established with reference to the principles laid out below: • Where a cost cannot be capitalised into either a connection or infrastructure asset, typically a revenue cost • Where a non-standard incremental cost is incurred as a result of a User's request, irrespective of whether the cost can be capitalised • Termination Charges associated with the write-off of connection assets at the connection site. Consistent with these principles and in accordance with Connection Charging Methodology modification GB ECM-01, which was implemented on 1 December 2005, a one-off charge will be levied for a Category 1 Intertripping Scheme or a Category 3 Intertripping Scheme. A one-off charge will not be levied for a Category 2 Intertripping Scheme or a Category 4 Intertripping Scheme. 14.4.3 The one-off charge is a charge equal to the cost of the works involved, together with a reasonable return, as shown in 14.4.4 below. 14.4.4 For information, the general formula for the calculation of the one-off charge for works is outlined below. One-off Charge = (Construction Costs + Engineering Charges) x (1 + Return %) + IDC + LD Premium Where: Engineering Charges = “Engineering Charge” x job hours Return % = 6% IDC = Interest During Construction LD Premium = The Company Liquidated Damages Premium (if applicable) 14.4.5 The calculation of the one-off charge for write-off of assets is outlined below: Write-off Charge = 100% of remaining NAV of redundant assets 14.4.6 One-offs are normally paid on an agreed date, which is usually upon completion of the works. However, arrangements may be agreed between the transmission licensee and the User to pay the charge over a longer period. If a one-off is paid over a longer period it is termed a Transmission Charge. It is usually a depreciating finance charge or annuity based charge with a rate of return element and may include agreement on a schedule of termination payments if the agreement is terminated before the end of the CUSC v1.48a Page 14 of 149 V1.48a 01 April 2026 annuity period. The charge is usually inflated annually by the same TOPI figure that is used to inflate GAVs, though Users can request alternative indexation methods. 14.4.7 Where an infrastructure asset has been subject to One-off Works, and a User has paid a relating charge calculated in accordance with paragraph 14.4.4, The Company may adjust the treatment of the assets within the TNUoS transport model as set out in paragraphs 14.15.15 to 14.15.22. Miscellaneous Charges 14.4.8 Other contract specific charges may be payable by the User, these will be set out in the Bilateral and Construction Agreements where appropriate. Rental sites 14.4.9 Where The Company owns a site that is embedded within a distribution network, the connection charge to the User is based on the capital costs and overheads but does not include maintenance charges. Final Metering Scheme (FMS)/Energy Metering Systems 14.4.10 Charges for FMS metering are paid by the registrant of the FMS metering at the connection site. It is charged on a similar basis as other Connection Assets. The electronic components of the FMS metering have a replacement and depreciation period in line with those advised by the transmission licensees, whilst the non- electronic components normally retain a 40 year replacement and depreciation period (or a User specified depreciation period as appropriate). CUSC v1.48a Page 15 of 149 V1.48a 01 April 2026 14.5 Connection Agreements Indicative Agreement 14.5.1 The standard connection agreement offered by The Company is an indicative price agreement. From the Charging Date as set out in the User's Bilateral Connection Agreement, the User's initial connection charge is based on a fair and reasonable estimate of the expected costs of the connection. Outturning the Indicative Agreement 14.5.2 Once the works required to provide a new or modified connection are completed and the costs finalised, the connection scheme is "outturned". The Company reconciles the monies paid by the User on the indicative charge basis against the charges that would have been payable based on the actual costs incurred in delivering the project together with any relevant interest. This process involves agreeing a new charging GAV (The Base Amount) with the User in line with the elements stated in paragraph 14.3.3 and then calculating connection charges with this GAV. 14.5.3 In addition, for Users that have chosen MEA revaluation their MEA ratios are agreed at outturn and this ratio is used for MEA revaluation in subsequent years. 14.5.4 In the case of connection asset replacement where there is no initiating User, the outturn is agreed with the User at the site. Firm Price Agreement 14.5.5 In addition to the options stated in paragraph 14.3.10 above, firm price agreements are also available. Typically with this option the charges to be incurred, and any indexation, are agreed between The Company and the User and connection charges are not recalculated once outturn costs are known. A typical example of a firm price agreement is: − Capital Contribution − Firm Price GAV − Running Costs (based on a firm price GAV) − Fixed Schedule of Termination Amounts 14.5.6 When a User selects a firm price agreement some or all of the above elements can be made firm. Any elements of the agreement that have not been made firm will be charged on an indicative basis in accordance with this statement. 14.5.7 Final Sums and Consents costs are never made firm in a Firm Price Agreement. Details of both are set out in the Construction Agreement. CUSC v1.48a Page 16 of 149 V1.48a 01 April 2026 Monthly Connection Charges 14.5.8 The connection charge is an annual charge payable monthly. 14.5.9 If the initial Charging Date does not fall within the current Financial Year being charged for and there are no revisions to charges during the year, the monthly connection charge will equal the annual connection charge divided by twelve. 14.5.10 For the Financial Year in which the Charging Date occurs (as set out in the User's Bilateral Agreement) or for any Financial Year in which a revision to charges has occurred during the Financial Year, for each complete calendar month from the Charging Date (or effective date of any charge revision) to the end of the Financial Year in which the Charging Date (or charge revision) occurs, the monthly connection charge shall be equal to the annual connection charge divided by twelve. 14.5.11 For each part of a calendar month, the charge will be calculated as one twelfth of the annual connection charge prorated by the ratio of the number of days from and including the Charging Date to the end of the month that the Charging Date falls in and the number of days in that month. 14.5.12 For example, say the annual connection charge for Financial Year 2010/11 is £1.2m and the Charging Date falls on the 15th November 2010, the monthly charges for the Financial Year 2010/11 would be as follows: • November = £1,200,000/12 * (16/30) = £53,333.33 • Dec 10, Jan 11, Feb 11, Mar 11 = £1,200,000/12 = £100,000.00 14.5.13 The above treatment does not apply to elements such as Miscellaneous Charges (as defined in 14.4.8) and Transmission Charges (annuitised one-offs, as defined in 14.4.6). If the Charging Date falls within a Financial Year, then the full annual charge will remain payable and will be spread evenly over the remaining months. This is because these payments are an annuitisation of charges that would normally be paid up-front as one-off payments. CUSC v1.48a Page 17 of 149 V1.48a 01 April 2026 14.6 Termination Charges Charges Liable 14.6.1 Where a User wholly or partially disconnects from the transmission system they will pay a termination charge. The termination charge will be calculated as follows: • Where the connection assets are made redundant as a result of the termination or modification of a Bilateral Connection Agreement, the User will be liable to pay an amount equal to the NAV of such assets as at the end of the Financial Year in which termination or modification occurs, plus: • The reasonable costs of removing such assets. These costs being inclusive of the costs of making good the condition of the connection site • If a connection asset is terminated before the end of a Financial Year, the connection charge for the full year remains payable. Any remaining Use of System Charges (TNUoS and BSUoS) also remain payable • For assets where it has been determined to replace upon the expiry of the relevant Replacement Period in accordance with the provisions set out in the CUSC and in respect of which a notice to Disconnect or terminate has been served in respect of the Connection Site at which the assets were located; and due to the timing of the replacement of such assets, no Connection Charges will have become payable in respect of such assets by the User by the date of termination; the termination charges will include the reasonable costs incurred by the transmission licensee in connection with the installation of such assets • Previous capital contributions paid to The Company will be taken into account 14.6.2 The Calculation of Termination amounts for Financial Year n is as follows: Termination Chargen = UoSn + Cn + NAVan + R - CC Where: UoSn = Outstanding Use of System Charge for year (TNUoS and BSUoS) Cn = Outstanding Connection Charge for year NAVan = NAV of Type A assets as at 31 March of Financial Year n R = Reasonable costs of removal of redundant assets and making good CC = An allowance for previously paid capital contributions 14.6.3 Examples of reasonable costs of removal for terminated assets and making good the condition of the site include the following: • If a circuit breaker is terminated as a result of a User leaving a site, this may require modifications to the protection systems. • If an asset were terminated and its associated civils had been removed to 1m below ground then the levels would have to be made up. This is a common condition of planning consent. CUSC v1.48a Page 18 of 149 V1.48a 01 April 2026 Repayment on Re-Use of Assets 14.6.4 If any assets in respect of which a termination charge was made to The Company are re-used at the same site or elsewhere on the system, including use as infrastructure assets, The Company will make a payment to the original terminating User to reflect the fact that the assets are being reused. 14.6.5 The arrangements for such repayments for re-use of Assets are that The Company will pay the User a sum equal to the lower of: i.) the Termination Amount paid in respect of such Assets; or ii.) the NAV attributed to such Assets for charging purposes upon their re-use less any reasonable costs incurred in respect of the storage of those assets. 14.6.6 The definition of re-use is set out in the CUSC. Where The Company decides to dispose of a terminated asset where it is capable of re-use, The Company shall pay the User an appropriate proportion of the sale proceeds received. Valuation of Assets that are re-used as connection assets or existing infrastructure assets re-allocated to connection 14.6.7 If an asset is reused following termination or allocated to connection when it has previously been allocated to TNUoS, a value needs to be determined for the purposes of connection charges. In both instances the connection charge will be based on the standard formula set out in paragraph 14.3.21. The Gross Asset Value will be based on the original construction costs and indexed by TOPI. Where original costs are not known a reasonable value will be agreed between The Company and the User based on similar types of asset in use. The Net Asset Value will be calculated as if the asset had been in continuous service as a connection asset from its original commissioning date taking into account the depreciation period. 14.6.8 Where an asset has been refurbished or updated to bring it back into service a new value and an appropriate replacement period will be agreed between The Company and the User. This will be based on the value of similar types of asset in service and the costs of the refurbishment. CUSC v1.48a Page 19 of 149 V1.48a 01 April 2026 14.7 Contestability 14.7.1 Some connection activities may be undertaken by the User. The activities are the provision, or construction, of connection assets, the financing of connection assets and the ongoing maintenance of those assets. While some Users have been keen to see contestability wherever possible, contestability should not prejudice system integrity, security and safety. These concerns have shaped the terms that are offered for contestability in construction and maintenance. Contestability in Construction 14.7.2 Users have the option to provide (construct) connection assets if they wish. Formal arrangements for Users exercising this choice are available and further information on User choice in construction can be obtained from The Company. CUSC v1.48a Page 20 of 149 V1.48a 01 April 2026 14.8 Asset Replacement 14.8.1 Appendix A of a User's Bilateral Connection Agreement specifies the age (number of complete Financial Years old), for charging purposes, of each of the NETS connection assets at the Connection Site for the corresponding Financial Year. Connection charges are calculated on the assumption that the assets will not need to be replaced until the charging age has reached the duration of the asset’s Replacement Period. If a connection asset is to be replaced, The Company will enter into an agreement for the replacement with the User. Where replacement occurs before the original asset’s charging age has reached the duration of its Replacement Period, The Company will continue to charge for the original asset and make no charge to the existing User for the new asset until the original asset’s charging age has reached the duration of its Replacement Period. Where the replacement occurs after the original asset’s charging age has reached the duration of its Replacement Period, The Company will charge on the basis of the original asset until replaced and on the basis of the new asset on completion of the works. 14.8.2 When the original asset’s charging age has reached the duration of its Replacement Period the User’s charge will be calculated on the then Net Asset Value of the new asset. The new asset begins depreciating for charging purposes upon completion of the asset replacement. The Basic Annual Connection Charge Formulae are set out in Chapter 2: The Basic Annual Connection Charge Formula. Asset Replacement that includes a change of Voltage 14.8.3 There are a number of situations where an asset replacement scheme may involve a change in the voltage level of a User's connection assets. These replacement schemes can take place over a number of years and may involve a long transitory period in which connection assets are operational at both voltage levels. 14.8.4 These situations are inevitably different from case to case and hence further charging principles will need to be developed over time as more experience is gained. Set out below, are some generic principles. This methodology will be updated as experience develops. 14.8.5 The general principles used to date are to ensure that, in the transitory period of an asset replacement scheme, the User does not pay for two full transmission voltage substations and that the charges levied reflect the Replacement Period of the original connection assets. In addition, in line with paragraph 14.8.1 above, charges will only be levied for the new assets once the original assets would have required replacement. 14.8.6 For example, a transmission licensee in investing to meet a future Security Standard need on the main transmission system, may require the asset replacement of an existing 275kV substation with a 400kV substation prior to the expiry of the original assets’ Replacement Period. In this case, The Company will seek to recover the connection asset component via connection charges when the assets replaced were due for asset replacement. Prior to this, the User should not see an increase in charges and therefore the investment costs would be recovered through TNUoS charges. In addition, if in the interim stage the User has, say, one transformer connected to the 275kV substation and one transformer connected to the 400kV substation, the charge CUSC v1.48a Page 21 of 149 V1.48a 01 April 2026 will comprise an appropriate proportion of the HV assets at each site and not the full costs of the two substations. Note that the treatment described above is only made for transitory asset replacement and not enduring configurations where a User has connection assets connected to two different voltage substations. CUSC v1.48a Page 22 of 149 V1.48a 01 April 2026 14.9 Data Requirements 14.9.1 Under the connection charging methodology no data is required from Users in order to calculate the connection charges payable by the User. 14.10 Applications 14.10.1 Application fees are payable in respect of applications for new connection agreements and modifications to existing agreements based on the reasonable costs transmission licensees incur in processing these applications. Users can opt to pay a fixed price application fee in respect of their application or pay the actual costs incurred. The fixed price fees for applications are detailed in the Statement of Use of System Charges. 14.10.2 If a User chooses not to pay the fixed fee, the application fee will be based on an advance of transmission licensees’ Engineering and out-of pocket expenses and will vary according to the size of the scheme and the amount of work involved. Once the associated offer has been signed or lapses, a reconciliation will be undertaken. Where actual expenses exceed the advance, The Company will issue an invoice for the excess. Conversely, where The Company does not use the whole of the advance, the balance will be refunded. 14.10.3 The Company will refund the first application fee paid (the fixed fee or the amount post-reconciliation) made under the Construction Agreement for new or modified existing agreements. The refund shall be made either on commissioning or against the charges payable in the first three years of the new or modified agreement. The refund will be net of external costs. 14.10.4 The Company will not refund application fees for applications to modify a new agreement or modified existing agreement at the User’s request before any charges become payable. For example, The Company will not refund an application fee to delay the provision of a new connection if this is made prior to charges becoming payable. CUSC v1.48a Page 23 of 149 V1.48a 01 April 2026 14.11 Illustrative Connection Charges From 2021/22 First Year Connection Charges based on the TOPI Method (6% rate of return used as an example) 14.11.1 The following table provides an indication of typical charges for new connection assets. Before using the table, it is important to read through the notes below as they explain the assumptions used in calculating the figures. Calculation of Gross Asset Value (GAV) 14.11.2 The GAV figures in the following table were calculated using the following assumptions: • Each asset is new • The GAV includes estimated costs of construction, engineering, Interest During Construction and Liquidated Damages premiums For details of the Calculation of the Gross Asset Value, see Chapter 2 of this Statement. Calculation of first year connection charge 14.11.3 The first year connection charges in the following table were calculated using the following assumptions: • The assets are new • The assets are depreciated over 40 years • The rate of return is assumed to be 6% for TOPI indexation • The connection charges include maintenance costs at a rate of 0.52% of the GAV • The connection charges include Transmission Running Costs at a rate of 1.45% of the GAV For details of the Basic Annual Connection Charge Formula, see Chapter 2 of this Statement. Please note that the actual charges will depend on the specific assets at a site. Agreement specific NAVs and GAVs for each User will be made available on request. Notes on Assets The charges for Double and Single Busbar Bays include electrical and civil costs. Transformer cable ratings are based on winter soil conditions. In this example, transformer charges include civil costs of plinth and noise enclosure and estimated transport costs, but not costs of oil dump tank and fire trap moat. Transport costs do not include hiring heavy load sea transportation or roll-on roll-off ships. CUSC v1.48a Page 24 of 149 V1.48a 01 April 2026 £000’s 400kV 275kV 132kV GAV Charge GAV Charge GAV Charge Double Busbar Bay 2300 239 1890 197 630 65 Single Busbar Bay 1830 190 460 50 Transformer Cables 100m (incl. Cable sealing ends) 120MVA 970 100 310 30 180MVA 1480 150 970 101 320 30 240MVA 1520 158 980 102 355 37 750MVA 1540 160 1135 118 Transformers 45MVA 132/66kV 1060 110 90MVA 132/33kV 102 0 106 120MVA 275/33kV 2110 219 180MVA 275/66kV 2560 266 180MVA 275/132kV 2180 227 240MVA 275/132kV 2630 273 240MVA 400/132kV 3180 340 CUSC v1.48a Page 25 of 149 V1.48a 01 April 2026 Connection Examples Example 1 NEW SUPERGRID CONNECTION SINGLE SWITCH MESH TYPE A B C A B C Lower Voltage Transmission Voltage SCHEDULE FOR NEW CONNECTION Ref A B C 2 x 90MVA Transformers 2 x 100m 90MVA Cables 2 x Double Busbar Transformer Bays Description 212 20 20 252 Total KEY: Existing Transmission Assets (infrastructure) New connection assets wholly charged to customer Customer Assets New Transmission Assets (infrastructure) 132/33kV 400/132kV Description First Year Charges (£000s) First Year Charges (£000s) 2 x 240MVA Transformers 2 x 100m 240MVA Cables 2 x Double Busbar Transformer Bays 680 72 130 882 Total CUSC v1.48a Page 26 of 149 V1.48a 01 April 2026 Example 2 NEW SUPERGRID CONNECTION DOUBLE BUSBAR TYPE A B C A B C D D Transmission Voltage Lower Voltage KEY: Customer Assets SCHEDULE FOR NEW CONNECTION Ref A B C D 2 x Double Busbar Transformer Bays 2 x 90MVA Transformers 2 x 100m 90MVA Cables 2 x Double Busbar Transformer Bays Description 382 Total 132/33kV 400/132kV Description First Year Charges (£000s) 1362 Total Existing Transmission Assets (infrastructure) New Transmission Assets (infrastructure) New connection assets wholly charged to customer 130 212 20 20 2 x Double Busbar Transformer Bays 2 x 240MVA Transformers 2 x 100m 240MVA Cables 2 x Double Busbar Transformer Bays 478 680 74 130 First Year Charges (£000s) CUSC v1.48a Page 27 of 149 V1.48a 01 April 2026 Example 3 EXTENSION OF SINGLE SWITCH MESH TO FOUR SWITCH MESH (extension to single user site) A A Transmission Voltage B B C C D D Lower Voltage KEY: New connection assets wholly charged to customer Customer Assets Existing connection assets wholly charged to another user New Transmission Assets (infrastructure) Existing Transmission Assets (infrastructure) SCHEDULE FOR NEW CONNECTION Ref A B C D 2 x 100m 240MVA Cables 2 x 90MVA Transformers 2 x 100m 90MVA Cables 2 x Double Busbar Transformer Bays Description 326 Total 132/33kV 400/132kV Description First Year Charges (£000s) 1200 Total 74 212 20 20 2 x 100m 240MVA Cables 2 x 240MVA Transformers 2 x 100m 240MVA Cables 2 x Double Busbar Transformer Bays 316 680 74 130 First Year Charges (£000s) Other Users Assets CUSC v1.48a Page 28 of 149 V1.48a 01 April 2026 14.12 Examples of Connection Charge Calculations The following examples of connection charge calculations are intended as general illustrations. Example 1 14.12.1 This example illustrates the method of calculating the first year connection charge for a given asset value. This method of calculation is applicable to indicative price agreements for new connections, utilising the TOPI method of charging, and assuming: i) the asset is commissioned on 1 April 2010 ii) there is no inflation from year to year i.e. GAV remains constant iii) the site specific maintenance charge component remains constant throughout the 40 years at 0.52% of GAV iv) the Transmission Running Cost component remains constant throughout the 40 years at 1.45% of GAV v) the asset is depreciated over 40 years vi) the rate of return charge remains constant at 6% for the 40 year life of the asset vii) the asset is terminated at the end of its 40 year life For the purpose of this example, the asset on which charges are based has a Gross Asset Value of £3,000,000 on 1 April 2010. Charge Calculation Site Specific Maintenance Charge (0.52% of GAV) 3,000,000 x 0.52% £15,600 Transmission Running Cost (1.45% of GAV) 3,000,000 x 1.45% £43,500 Capital charge (40 year depreciation 2.5% of GAV) 3,000,000 x 2.5% £75,000 Return on mid-year NAV (6%) 2,962,500 x 6% £177,750 TOTAL £311,850 The first year charge of £311,850 would reduce in subsequent years as the NAV of the asset is reduced on a straight-line basis. This gives the following annual charges over time (assuming no inflation): Year Charge 1 £311,850 2 £307,350 10 £271,350 40 £136,350 Based on this example, charges of this form would be payable until 31 March 2050. CUSC v1.48a Page 29 of 149 V1.48a 01 April 2026 Example 2 14.12.2 The previous example assumes that the asset is commissioned on 1 April 2010. If it is assumed that the asset is commissioned on 1 July 2010, the first year charge would equal 9/12th of the first year annual connection charge i.e. £233,887.50 This gives the following annual charges over time: Year Charge 1 £233,887.50 (connection charge for period July to March) 2 £307,350 10 £271,350 40 £136,350 Example 3 14.12.3 In the case of a firm price agreement, there will be two elements in the connection charge, a finance component and a running cost component. These encompass the four elements set out in the examples above. Using exactly the same assumptions as those in example 1 above, the total annual connection charges will be the same as those presented. These charges will not change as a result of the adoption of a different charging methodology by The Company, providing that the connection boundary does not change. Example 4 14.12.4 If a User has chosen a 20-year depreciation period for their Post Vesting connection assets and subsequently remains connected at the site beyond the twentieth year their charges are calculated as follows. For years 21-40 they will pay a connection charge based on the following formula: Annual Connection Chargen = SSFn (TOPIGAVn)+ TCn (GAVn) The NAV will be zero and the asset will be fully depreciated so there will be no rate of return or depreciation element to the charge. CUSC v1.48a Page 30 of 149 V1.48a 01 April 2026 14.13 Nominally Over Equipped Connection Sites 14.13.1 This chapter outlines examples of ways in which a connection site can be considered as having connection assets that exceed the strict, theoretical needs of the individual Users at the connection site. These can be described as: Historical 14.13.2 This is where the connection assets at the connection site were installed to meet a requirement of the Users for connection capacity that no longer exists. An example would be where a User, at one time, had a requirement for, say, 270 MW. This would allocate three 240 MVA 400/132kV transformers to the User. Due to reconfiguration of that User’s network only 200 MW is now required from the connection site. The lower requirement would only allocate two transformers, but all the transformers are kept in service. The connection assets will continue to be assigned to the User’s connection, and charged for as connection, until the User makes a Modification Application to reduce the historical requirement. In some cases the Modified requirement will mean that Termination Payments will have to be made on some connection assets. Early Construction 14.13.3 If a User has a multi-phase project, it may be necessary to install connection assets for the latter phases at the time of the first phase. These connection assets could be charged from the first phase charging date. Connection site Specific Technical or Economic Conditions 14.13.4 In circumstances where the transmission licensee has identified a wider requirement for development of the transmission system, it may elect to install connection assets of greater size and capacity than the practicable minimum scheme required for a particular connection. In these circumstances, however, connection charges for the party seeking connection will normally be based on the level of connection assets consistent with the practicable minimum scheme needed to meet the applicant's requirements. 14.13.5 There may be cases where there are specific conditions such that the practicable minimum scheme at a site has to be greater than the strict, theoretical interpretation of the standards. In these cases all assets will still be assigned to connection and connection charges levied. 14.13.6 A practicable minimum scheme is considered in terms of the system as a whole and may include a change in voltage level. CUSC v1.48a Page 31 of 149 V1.48a 01 April 2026 Part 2 - The Statement of the Use of System Charging Methodology Section 1 – The Statement of the Transmission Use of System Charging Methodology 14.14 Principles 14.14.1 Transmission Network Use of System Charges reflect the cost of installing, operating and maintaining the Transmission System for the Transmission Owner (TO) (including Competitively Appointed Transmission Owners (CATOs)) activity functions of the Transmission Businesses of each Relevant Transmission Licensee. These activities are undertaken to the standards prescribed by the ESO Licence and the Transmission Licences, to provide the capability to allow the flow of bulk transfers of power between Connection Sites and to provide transmission system security. 14.14.2 The allowed revenue defined for these activities agreed with the Authority at the time of the Transmission Owners’ price control review for the succeeding price control period. The allowed revenue can be adjusted during the price control period. Transmission Network Use of System Charges are set to recover the allowed revenue as set by the price control (where necessary, allowing for any Kt adjustment for under or over recovery in a previous year net of the income recovered through pre-vesting connection charges). 14.14.2a The payments made to Competitively Appointed Transmission Owners (CATOs) are not set via a price control of the same form as incumbent Transmission Owners; instead, the payment to each CATO takes the form of a Tender Revenue Stream (TRS). The method for determining the TRS for a CATO will be prescribed within its licence. Transmission Network Use of System Charges are set to recover the Allowed Revenue which is determined in accordance with the terms of the CATO’s licence, such Allowed Revenue may include amongst other things the TRS, adjustments for indexation and incentivisation, and other payments provided for under its licence. 14.14.3 The basis of charging to recover the allowed revenue is the Investment Cost Related Pricing (ICRP) methodology, which was initially introduced by The Company in 1993/94 for England and Wales. The principles and methods underlying the ICRP methodology were set out in The Company document "Transmission Use of System Charges Review: Proposed Investment Cost Related Pricing for Use of System (30 June 1992)". 14.14.4 In December 2003, The Company published the Initial Thoughts consultation for a GB methodology using the England and Wales methodology as the basis for consultation. The Initial Methodologies consultation published by The Company in May 2004 proposed two options for a GB charging methodology with a Final Methodologies consultation published in August 2004 detailing The Company’s response to the Industry with a recommendation for the GB charging methodology. In December 2004, The Company published a Revised Proposals consultation in response to the Authority’s invitation for further review on certain areas in The Company’s recommended GB charging methodology. CUSC v1.48a Page 32 of 149 V1.48a 01 April 2026 14.14.5 In April 2004 The Company introduced a DC Loadflow (DCLF) ICRP based transport model for the England and Wales charging methodology. The DCLF model has been extended to incorporate Scottish network data with existing England and Wales network data to form the GB network in the model. In April 2005, the GB charging methodology implemented certain proposals which have been further expanded so that the model now includes the following: i.) The application of multi-voltage circuit expansion factors with a forward- looking Expansion Constant that does not include substation costs in its derivation. ii.) The application of locational security costs, by applying a multiplier to the Expansion Constant reflecting the difference in cost incurred on a secure network as opposed to an unsecured network. iii.) The application of a de-minimus level demand charge of £0/kW for Half Hourly and £0/kWh for Non-Half Hourly metered demand and £0/KWh for Unmetered Supplies and £0/site/day for Transmission Demand Residual Tariffs, to avoid the application of negative demand charges. iv.) The application of 132kV expansion factor on a Transmission Owner basis reflecting the regional variations in network upgrade plans. v.) The Company will set tariffs in a manner so that the locationally varying element, as established by the DCLF ICRP model and, where appropriate, local substation and local circuit charges, are levied on all Generator and Demand Users. Any remaining Transmission Owner revenues will be recovered from demand only in a non-locational manner through the Transmission Demand Residual Tariffs vi.) For the purpose of compliance with the Limiting Regulation in the context of setting limits on the annual charges paid by generation The Company will exclude Charges for Physical Assets Required for Connection when calculating the total amount to be recovered from Generators (GCharge (Forecast)). vii.) If having applied the exclusion of Charges for Physical Assets Required for Connection The Company identifies that an adjustment to TNUoS Charges is required to remain compliant with the Limiting Regulation then an Adjustment Tariff will be applied to all Generators in the following circumstances. a) The Adjustment Tariff will be applied if The Company identifies that either: 1. Annual average TNUoS charges payable by Generator Users will fall below €0/MWh OR 2. Annual average TNUoS charges payable by Generator Users will exceed €2.50/MWh adjusted by a risk margin to allow for error in tariff setting. b) Where annual average TNUoS charges to Generators are positive under the GCharge (Forecast) the Adjustment Tariff will be applied if the Adjustment Revenue is less than £0. The Adjustment Revenue is expressed as: 𝐴𝑑𝑗𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = (𝐺𝑂 ∗ ((𝐶𝑎𝑝𝐸𝐶 ∗ (1 − 𝑦)) ∗ 𝐸𝑅)) – CUSC v1.48a Page 33 of 149 V1.48a 01 April 2026 𝐺𝐶ℎ𝑎𝑟𝑔𝑒(𝐹𝑜𝑟𝑒𝑐𝑎𝑠𝑡) c) Where annual average TNUoS charges to Generators are negative under the GCharge (Forecast) the Adjustment Revenue will be the difference between £0 and the total recovered from Generators. The Adjustment Revenue will be expressed as: 𝐴𝑑𝑗𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 0 − 𝐺𝐶ℎ𝑎𝑟𝑔𝑒(𝐹𝑜𝑟𝑒𝑐𝑎𝑠𝑡) d) The total adjusted revenue expected to be recovered from Generators (AdjGenRev) through TNUoS tariffs can therefore be expressed as: 𝐴𝑑𝑗𝐺𝑒𝑛𝑅𝑒𝑣 = 𝐺𝐶ℎ𝑎𝑟𝑔𝑒(𝐹𝑜𝑟𝑒𝑐𝑎𝑠𝑡) + 𝐴𝑑𝑗𝑅𝑒𝑣𝑒𝑛𝑢𝑒 e) The error margin used in calculating TNUoS tariffs for the Financial Year is expressed as: y = (1+ ErrorGenRev) / (1 - ErrorGO) -1 f) Where: y = error margin expressed in %. ErrorGenRev = the highest absolute percentage error in generation revenue collection, adjusted by systemic error, from the past 5 full years (year t-6 to t-2 inclusive). Systemic error is the average of %error in generation revenue collection for the past 5 full years. Systemic error can be positive or negative. ErrorGO = the highest absolute percentage error in generation TWh outputs, from the past 5 full years (year t-6 to t-2 inclusive). g) The Company will use the latest OBR Forecast of £/€ exchange rate published prior to the 31st October in the year preceding the relevant Financial Year to convert average annual TNUoS charges payable by Generators in the GCharge (Forecast) to a comparable value for the purposes of assessing compliance with the Limiting Regulation. h) The Adjustment Tariff used in the calculation will be either: 1. a negative £/kW tariff that reduces annual average TNUoS charges to Generators to below the risk adjusted upper limit of the Limiting Regulation in accordance with 14.14.5 (f). OR 2. a positive £/kW tariff that increases annual average TNUoS charges to Generators to above the lower limit of the Limiting Regulation in accordance with 14.14.5 (f). Expressed in either case as: 𝐴𝑑𝑗𝑇𝑎𝑟𝑖𝑓𝑓= 𝐴𝑑𝑗𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝐶ℎ𝑎𝑟𝑔𝑒𝑎𝑏𝑙𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 CUSC v1.48a Page 34 of 149 V1.48a 01 April 2026 Where; CapEC = Upper limit of the range specified in the Limiting Regulation y = Error margin built in to adjust CapEC GO = Forecast GB Generation Output for generation liable for Transmission charges (i.e. energy injected into the transmission network in MWh) for the Financial Year ER = The latest OBR Forecast €/£ Exchange Rate published prior to the 31st October in the year preceding the relevant Financial Year GCharge (Forecast) = The total forecast TNUoS revenue to be recovered from Generators in the Financial Year minus Charges for Physical Assets Required for Connection. AdjRevenue = Adjustment Revenue Chargeable Capacity = as per paragraph 14.18.6 AdjTariff = Any Adjustment Tariff required to remain compliant with the Limiting Regulation. viii.) The currently applicable number of generation zones, determined in accordance with 14.15.37 and using the criteria outlined in paragraph 14.15.42, is detailed in the Statement of Use of System Charges which is available from the Website. ix.) The number of demand zones has been determined as 14, corresponding to the 14 GSP groups. 14.14.6 The underlying rationale behind Transmission Network Use of System charges is that efficient economic signals are provided to Users when services are priced to reflect the incremental costs of supplying them. Therefore, charges should reflect the impact that Users of the transmission system at different locations would have on the Transmission Owner's costs, if they were to increase or decrease their use of the respective systems. These costs are primarily defined as the investment costs in the transmission system, maintenance of the transmission system and maintaining a system capable of providing a secure bulk supply of energy. The ESO Licence requires The Company to operate the National Electricity Transmission System to specified standards. In addition The Company and transmission licensees are required to plan and develop the National Electricity Transmission System to meet these standards. These requirements mean that the system must conform to a particular Security Standard and capital investment requirements are largely driven by the need to conform to both the deterministic and supporting cost benefit analysis aspects of this standard. It is this obligation, which provides the underlying rationale for the ICRP approach, i.e. for any changes in generation and demand on the system, The Company must ensure that it satisfies the requirements of the Security Standard. 14.14.7 The Security Standard identifies requirements on the capacity of component sections of the system given the expected generation and demand at each node, such that demand can be met and Generators’ output over the course of a year (capped at their Transmission Entry Capacity, TEC) can be accommodated in the most economic and efficient manner. The derivation of the incremental investment costs at different points on the system is therefore determined against the requirements of the system both at the time of peak demand and across the remainder of the year. The Security Standard uses a CUSC v1.48a Page 35 of 149 V1.48a 01 April 2026 Demand Security Criterion and an Economy Criterion to assess capacity requirements. The charging methodology therefore recognises both these elements in its rationale.