Page type: primary-anchored (mirrors DUoS Charging Methodology - CDCM and EDCM)

DUoS Charging Methodology

Distribution Use of System (DUoS) charges are the fees paid by electricity suppliers for use of the local distribution network. They cover DNO operating and capital costs, pass through to consumer bills, and are the primary revenue recovery mechanism for all 14 licensed DNOs in Great Britain.

Legal basis: Electricity Act 1989; Distribution Licence SLC 13; DCUSA Schedules 14 (CDCM) and 19 (EDCM) Operators: Each DNO publishes its own annual tariff statement within a common methodology framework Methodology home: https://www.dcusa.co.uk/network-charges/duos-models/ Source file: sources/neso/duos-charging-methodology.md

What DUoS is

DUoS charges flow from electricity suppliers to DNOs under the DCUSA. They fund the distribution network: cables, substations, transformers, and control equipment from the grid supply point (GSP, the transmission-distribution boundary) down to the meter.

DUoS is distinct from TNUoS (transmission charges paid to National Grid), BSUoS (balancing charges to NESO), and connection charges (one-off capital costs). It is typically the largest network charge on a consumer bill, accounting for roughly 12-15% of a household electricity bill and a higher share for large commercial and industrial users. Total DNO allowed revenue under RIIO-ED2 (2023-2028) reflects approximately £22bn of approved investment.

DUoS charges are set annually by each DNO (published January, effective April). All 14 DNO licence areas must follow either the CDCM or EDCM methodology framework. Ofgem can direct derogations.

Two methodologies: CDCM and EDCM

CDCM: Common Distribution Charging Methodology

Applies to LV and HV connections: 230V domestic, 400V three-phase, 11kV commercial and industrial. Covers approximately 99% of all connection points.

The CDCM uses a Distribution Reinforcement Model to allocate each DNO's allowed revenue across customer categories. It produces three types of charge:

• Unit rates (p/kWh): Split across three time-of-use bands - red, amber, green. Red is the most expensive (peak demand, typically 16:00-19:00 weekdays). Amber covers daytime off-peak. Green covers overnight and weekends. The bands reflect the marginal cost of reinforcement at different times of day.
• Capacity charges (p/kVA/day): Based on agreed maximum demand. Reflects the cost of reserving network capacity. Domestic customers pay no explicit capacity charge (they have no formal agreed demand).
• Fixed charges (p/MPAN/day): A daily standing charge per meter point. After the Targeted Charging Review (2022), the residual portion of DUoS moved into fixed charges, significantly increasing their size.

Customer categories: LV domestic (NHH), LV non-domestic (NHH), LV HH metered, HV HH metered, unmetered (street lighting), and generation categories at each voltage level.

EDCM: Extra High Voltage Distribution Charging Methodology

Applies to EHV connections: 33kV, 66kV, and 132kV. Covers large industrial sites, major commercial loads, large embedded generators (wind, solar, battery), and interconnections. Small in connection count but significant in throughput.

EDCM charges are site-specific, calculated using either: - FCP (Forward Cost Pricing): Charges based on the forward-looking capital cost of reinforcement attributable to the specific site. - LRIC (Long Run Incremental Cost): Nodal model calculating the reinforcement cost brought forward or deferred by each site's demand or generation. Produces Charge 1 (capacity-related) and Charge 2 (demand-at-peak-related), each with Local and Remote components.

Both models produce charges that vary by site, making EDCM tariffs less predictable than CDCM. The methodology has produced volatile results as the mix of EHV customers shifts (more battery storage, EV infrastructure, large-scale renewables). Ofgem issued derogations to multiple DNOs for 2027-28 charges.

Targeted Charging Review: the fixed vs volumetric shift

The TCR (Ofgem decision: November 2019, implemented April 2022 for DUoS) was the most significant reform to DUoS structure in a decade.

Problem: Residual charges (approximately 50% of DUoS revenue) were collected volumetrically - per kWh. This incentivised large consumers to install behind-the-meter generation or battery storage purely to reduce their DUoS bill, without reducing the network costs that created it. The residual burden shifted onto consumers without flexibility.

TCR solution: Residual DUoS charges moved to fixed daily charges, banded by voltage level and available supply capacity (ASC). Domestic customers pay a single fixed rate per day. Non-domestic customers pay by voltage and ASC band. The time-of-use unit rates (red/amber/green) continue only for the forward-looking ~50% of DUoS.

Effect on consumer bills (April 2024): Fixed DUoS charges rose sharply; unit rates fell by approximately 25% relative to the previous year. The demand flexibility signal from red band charges is diluted but not eliminated.

Access SCR: the connection charging reform

The Access and Forward-Looking Charges SCR (launched 2018, decided May 2022) changed who pays for network reinforcement when a new connection is made. Under the old regime, connecting users paid "deep" connection charges - contributing to upstream reinforcement. The Access SCR moved to "shallow" connection charging: new connections pay only for assets directly serving them; upstream reinforcement is recovered through ongoing DUoS capacity charges instead.

The first full year of Access SCR implementation was 2025-26. The visible effect: DUoS capacity charges rose sharply while fixed charges fell. The change increases DUoS for all existing users (who collectively fund reinforcement that previously would have been paid by new entrants) but reduces upfront connection costs for new demand.

How DUoS relates to consumer bills

For a typical household electricity bill, network charges (combined distribution and transmission) account for roughly 20-25% of the total bill. Of that, DUoS (distribution) is the larger portion. The exact split varies by region, tariff structure, and year.

For large I&C consumers settled half-hourly, DUoS can be a substantial and manageable cost item. Peak demand management (avoiding red band periods, controlling agreed capacity) has historically offered meaningful savings. Post-TCR, the savings potential from demand shifting is reduced because the residual is now fixed regardless of consumption pattern.

Status of the methodology

Both CDCM and EDCM date from 2010-2012 and were designed for a passive-consumer network. The DUoS Significant Code Review (launched February 2022) was intended to modernise both methodologies. Progress has been slow: Ofgem has deprioritised the DUoS SCR pending clarity on REMA (Review of Electricity Market Arrangements) and the broader Energy Cost Allocation and Recovery review. A fundamental methodology review is flagged as urgently needed before the 2027-28 charge-setting process.

Key reform timeline

Cross-references

• DCUSA - the operative agreement housing both methodologies (Schedules 14 and 19)
• Distribution Licence SLC 13 - the licence obligation to maintain charging methodologies
• RIIO-ED2 - the 2023-2028 price control setting DNO allowed revenue
• TNUoS Charging Methodology - transmission equivalent (under CUSC, separate)
• Access SCR: https://www.ofgem.gov.uk/decision/access-and-forward-looking-charges-significant-code-review-decision-and-direction
• TCR: https://www.ofgem.gov.uk/decision/targeted-charging-review-decision-and-impact-assessment
• DUoS SCR: https://www.ofgem.gov.uk/publications/distribution-use-system-charges-significant-code-review-launch