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TNUoS Charging Methodology

Networks and charging·Topic·4 min read

title: "TNUoS Charging Methodology" type: wiki last_updated: 2026-04-12 source_canonical: sources/neso/tnuos-charging-methodology.md tags: [neso, tnuos, transmission-charges, cusc, locational, zonal]

TNUoS Charging Methodology

What TNUoS is

Transmission Network Use of System (TNUoS) charges pay for the high-voltage transmission network (400kV, 275kV, 132kV in Scotland). Every generator and every large demand user connected to the transmission network pays TNUoS to the three transmission owners (National Grid ET, Scottish Power Transmission, SSEN Transmission). Smaller demand users pay via their supplier.

The legal basis is CUSC Section 14, which sets out the full methodology. NESO (formerly NGESO) administers it.

TNUoS is one of three major use-of-system charges: - TNUoS - transmission network costs - DUoS - distribution network costs (levied at lower voltages) - BSUoS - real-time balancing costs (separate charge, also administered by NESO)

Who pays and how much

Scale: approximately £5.1 billion in 2025/26, rising sharply to approximately £8.9 billion in 2026/27 when the RIIO-ET3 price control begins. Forecast to reach approximately £13.6 billion by 2030/31 as the transmission network is reinforced for the energy transition.

The RIIO-ET3 allowed revenue (April 2026 to March 2031) is £46.2 billion - reflecting a major step-up in network investment to accommodate wind, interconnectors, and new demand.

Generators pay per kW of Transmission Entry Capacity (TEC) - the capacity rights in their connection agreement. Generation TNUoS is approximately 20-25% of total revenue (roughly £1.1-1.2bn in 2025/26).

Demand users (via suppliers) pay the remaining 75-80%. Demand TNUoS is the largest network charge on most electricity bills.

Locational vs residual split

TNUoS has two components:

1. Locational element (ICRP)

Calculated using the Direct Current Load Flow Investment Cost Related Pricing (DCLF ICRP) model. The model simulates the GB transmission network (562 substations, 1,015 modelled nodes, 1,515 circuits) and calculates the marginal cost impact of adding generation or demand at each location. These costs are then scaled by an expansion constant (a notional cost per MW-km of new circuit) to produce tariffs in £/kW/year.

Results are aggregated into: - 27 generation zones - tariffs range from strongly positive (far north Scotland) to negative (southern England), reflecting distance from demand centres - 14 demand zones - post-TCR, most demand zones face zero locational charge (floored at £0)

The locational element is the part of TNUoS that functions as an investment signal: it tells developers where generation is cheap or expensive from a transmission perspective.

2. Residual element

Recovers the gap between locational revenue and total allowed revenue, because ICRP reflects marginal costs rather than average costs.

Post-TCR (from April 2023): - Generation residual: set to £0/kW - generators now pay only the locational tariff - Demand residual: converted to fixed standing charges (£/site/day) by voltage class and capacity band; the same rate applies nationwide within each band (no regional variation)

TCR reform: what changed and when

The Targeted Charging Review (Ofgem decision November 2019) was the biggest network charging reform in a decade. Core rationale: residual charges recover sunk costs; they should be levied in a way that is hardest to avoid, so they do not distort behaviour.

DUoS residual became fixed: April 2022. TNUoS residual became fixed: April 2023.

Key changes for TNUoS:

  • Triad system replaced: the Transmission Demand Residual had been charged based on the three half-hours of highest system demand each winter (the "Triads"). Demand users and embedded generators had strong incentives to reduce demand or generate during Triads. From April 2023, the TDR became a fixed daily charge by band - Triad avoidance lost most of its financial value.

  • Generation residual removed: the Transmission Generation Residual (TGR) was set to zero. Generators no longer pay a residual component.

  • Embedded generation credits removed: sub-100MW generators connected to the distribution network had been receiving large TNUoS Demand Residual payments for "avoiding" Triad demand. These payments were phased out (beginning with CMP264/CMP265 from April 2018, and fully resolved by TCR).

  • HH locational element retained but tiny: a small half-hourly locational demand charge persists, still based on Triad periods, but is floored at £0 and typically accounts for roughly 3% of demand TNUoS costs.

How it relates to the nodal pricing debate

TNUoS is often cited in debates about whether GB should move to locational/zonal/nodal electricity pricing.

The case for TNUoS as sufficient locational signal: generators already see location-specific charges. A wind developer in the north of Scotland pays approximately £10-15/kW/year more than one in the south of England (at 2025/26 tariff levels), equivalent to perhaps £3-5/MWh. This is an economic signal, if not a very powerful one.

The case against: several weaknesses limit TNUoS's effectiveness as a locational signal: - Charged on capacity, not energy output - the per-MWh signal is diluted for generators with low load factors - High year-to-year volatility (partially addressed by CMP353 which stabilised the expansion constant from 2021) - Signal affects future plant location decisions but not dispatch once built - CfD contracts remove generators' exposure to locational wholesale price signals, leaving TNUoS as the only locational cost signal - but at insufficient magnitude to redirect major investment flows

REMA outcome (July 2025): the UK government rejected zonal wholesale pricing, confirming a single GB-wide national price. Instead, Ofgem is conducting a TNUoS review (target: completed by 2029) to improve locational signals through charging and deepen connection charges as a proxy for locational investment signals.

Key cross-references

  • CUSC (instruments.md row 25) - TNUoS methodology lives in CUSC Section 14
  • DUoS Charging Methodology (instruments.md row 85) - distribution equivalent
  • BSUoS Charging Methodology (instruments.md row 86) - real-time balancing charge
  • RIIO-T2 / RIIO-ET3 (Ofgem price controls) - sets the allowed revenue that TNUoS must recover
  • CfDs - most new generation is CfD-contracted; TNUoS is not within the CfD so generators bear it
  • REMA - market-wide review that decided against zonal pricing, triggering TNUoS reform
  • Canonical source: ~/knowledge/sources/neso/tnuos-charging-methodology.md