TNUoS Reform Under Reformed National Pricing

Last updated: 2026-04-04

What It Is

TNUoS (Transmission Network Use of System) charges recover the cost of building and maintaining the GB transmission network from users. The current methodology uses an Incremental Cost Related Pricing (ICRP) transport model to calculate locational charges: generators in areas far from demand pay more; generators close to demand pay less (or receive credits). Demand pays through supplier charges.

The methodology has been emergency-frozen twice in consecutive price controls (CMP353 under RIIO-ET2, CMP463 under RIIO-ET3) because the transport model produces outputs too volatile for the regulator to accept. Ofgem's March 2026 Call for Input on locational charges is the start of the enduring reform process, with implementation targeted by 2029.

TNUoS reform is one component of the wider REMA reform package (see rema.md), alongside the SSEP, connection reform, and capacity market reform.

TNUoS Revenue Structure (2026/27)

Source: NESO, Final TNUoS Tariffs for 2026/27, Version 1.0, January 2026, p.6.

The Limiting Regulation

EU Regulation 838/2010 (retained in GB law as "assimilated law" post-Brexit) caps the average annual generation TNUoS charge at €0-2.50/MWh. The 2026/27 tariffs apply a negative adjustment of -£2.48/kW across all generators to comply.

Why it matters: The cap prevents locational charges from fully internalising the constraint costs that Scottish wind generators impose. Scottish wind zones face tariffs of £15-34k/MW/year while imposing constraint costs of approximately £97k/MW/year. The cap stops the signal reaching its true level.

Removal timeline: The Retained EU Law (Revocation and Reform) Act 2023, Section 14, gave ministers power to revoke assimilated law by statutory instrument. That window closes 23 June 2026. After that date, removing the cap requires new primary legislation. The REMA Summer Update 2025 confirmed TNUoS reform will be delivered via primary legislation, which strongly implies the cap is on the table.

CMP255: The CUSC was already modified to prepare for potential removal of the Limiting Regulation. The legal architecture for removal exists; the political decision does not.

CMP463: The Emergency Freeze

In October 2025, SSE proposed CMP463 to stabilise the Specific Onshore Expansion Factors from 1 April 2026. Ofgem approved it on 27 January 2026. The modification freezes expansion factors at 2025/26 levels because the RIIO-ET3 price control produced "large, unexpected increases" that would have caused tariff shocks.

This is the second emergency freeze. CMP353 did the same for RIIO-ET2. Two consecutive interventions to suppress the ICRP model's outputs are evidence the methodology is no longer fit for purpose.

Source: NESO CUSC Modification Register, CMP463, approved 27 January 2026, implemented 1 April 2026.

The Ofgem Call for Input (26 March 2026)

Document: Call for Input: Locational Charges and Regulatory Siting Levers under Reformed National Pricing, 74pp, closes 26 May 2026.

URL: https://www.ofgem.gov.uk/sites/default/files/2026-03/Locational_Charges_and_Regulatory_Siting_Levers_under_Reformed_National_Pricing.pdf

The consultation presents five options (A-E) for reforming generation locational charges. Para 3.4 permits hybrid approaches: "Any of these options could be applied in isolation. In principle, the core elements of these approaches could be combined in a hybrid approach."

The Five Options

• Option A (targeted ICRP changes): Retain the existing ICRP transport model, make focused changes for predictability and SSEP alignment. Limited in how far charging can reflect spare capacity or address model weaknesses.
• Option B (Network Utilisation Impact Charge): Retain long-run cost principles but use an alternative model reflecting spare capacity, with forward-looking assessments of reinforcement needs.
• Option C (System and Constraints Impact Charge): Charges reflect long-term modelling linked to SSEP planning outputs, incorporating expected network constraint patterns and future network upgrades. Forward-looking, SSEP-linked (para 3.22).
• Option D (Metric-Based): Simplified proxies based on SSEP alignment or constraints impact. Ofgem suggests it could work as a "top-up" alongside another methodology (Q13, para 3.33).
• Option E (Plan-Based Auction Pricing): "Charges could be set in each SSEP zone by auctioning off SSEP-aligned capacities of connections" and "could be linked to connection or Use of System charges" (paras 3.28-3.30). Discovers market value of zone capacity.

Assessment Criteria (Table 2, p.22)

1. Wider system value: Alignment with SSEP outcomes
2. Efficiency: Consumer benefit, fair allocation of costs and risks
3. Investability: Predictable, transparent, timely
4. Enabling competition: Sufficient competitive dynamics
5. Deliverability: Not unduly complex, implementable within timeline

Key Questions

• Q2: Do you have a preference for any of the five options?
• Q13: Could a metric-based charge act as a complementary top-up alongside a broader methodology?
• Q15: What interactions do you foresee between plan-based auctions, government support mechanism auctions, and the connections regime?
• Q16: What design features could help auctions remain workable across zones with different project interest?
• Q17: Could alternative mechanisms achieve similar outcomes with fewer risks or dependencies?

Chapter 7: Legacy and Transitional Arrangements (LAT)

Covers treatment of existing generators ("legacy assets") and projects with FID made before full RNP implementation ("transitional assets"). Three design choices:

1. Retain a parallel charging regime based on existing methodology, updated annually
2. Phased implementation from existing to RNP approach over a set period
3. Create a fixed charging regime where charges are not recalculated once set

Eligibility would use FID (Final Investment Decision) as the primary criterion, potentially narrowed by market route (CfD, Capacity Market, fully commercial).

The Mispricing Problem

Constraint costs are recovered through BSUoS charges, not TNUoS. Since CMP308 (April 2023), BSUoS is charged entirely to demand. Generators pay zero balancing costs regardless of location.

Thermal constraint costs have quadrupled in six years:

Source: NESO, 2025 Annual Balancing Costs Report, June 2025, p.19.

The Scottish wind mispricing (Exhibit 4 from TNUoS analysis):

Constraint cost is a Scotland-wide blended average (£1.43bn / 14.7 GW Scottish wind = £97k/MW). Zone-specific figures are not published. Direction of comparison holds across zones.

Character Positions on TNUoS Reform

Adam Bell (Stonehaven)

Position: Supports "polluter pays" approach to congestion charges (Beyond REMA, November 2025). Generators causing constraints should bear the cost rather than having it socialised through BSUoS. This is the clearest named advocacy for constraint cost localisation found in the 2025-26 debate.

See characters/bell/positions.md for detail.

Dieter Helm

Position: Framework critique rather than option preference. His system-cost accounting would observe that the debate over Options A-E is about reconstructing information (locational value) that a nodal price would produce automatically. Not directly engaged with Ofgem's consultation as of 2026-04-04.

Tone Langengen (TBI)

Position: Nodal pricing advocate. Would likely view the Options A-E exercise as a second-best response to REMA's rejection of nodal pricing. TBI's flagship position is that locational value should be discovered in the wholesale market, not calculated administratively.

Cross-References

• rema.md - Wider REMA reform context
• uk-grid-constraints.md - Constraint costs, B6 boundary, balancing
• network-levy-charge.md - Alternative mechanism (NLC) addressing full cost internalisation
• characters/bell/positions.md - Bell's polluter pays position
• characters/helm/ - Helm's system cost accounting framework

Sources

Robert's Analysis

Robert's consultation response (April 2026) argues for a three-layer reform: (1) C+E hybrid within this consultation, (2) a Network Levy Charge for the medium term, (3) nodal pricing as the end state. See Projects/energy-intel/data-centers/tnuos-auction-analysis.md and Projects/energy-intel/data-centers/substack-network-levy-charge.md.