Why Are Businesses Paying for Grid Upgrades While Energy Giants Celebrate Record Profits?

Opinion Post…

UK businesses are bracing themselves for another round of increased electricity costs. Transmission charges, distribution fees, and other third-party levies -collectively often referred to as “non-commodity” charges - are set to rise sharply.

But there’s a question that’s becoming harder to ignore:

why are businesses and consumers shouldering the cost of grid upgrades, while the major energy companies report record profits?

The Numbers Don’t Add Up

• Rising network charges: Charges like TNUoS, DUoS, and balancing costs have been climbing steadily, driven by investment in the electricity grid to accommodate renewables, EVs, and increased demand.

• Energy company profits: Meanwhile, some of the UK’s largest energy suppliers continue to post record profits - sometimes billions - due to a combination of wholesale price volatility, retail pricing strategies, and ancillary services.

Businesses are effectively paying twice: once through non-commodity charges for network upgrades, and again through the wholesale and retail prices set by energy suppliers.

Why Aren’t the Energy Giants Being Held Accountable?

Several factors contribute:

1. Regulatory Structure

   • Ofgem regulates networks, not energy suppliers directly. Network companies can recover the costs of upgrades from consumers; profits of the big energy retailers are largely separate.

2. Government Priorities

   • There’s a focus on keeping investment flowing into grid modernisation and decarbonisation. Passing the cost onto consumers is seen as the most straightforward mechanism.

3. Political Caution

   • Direct intervention in supplier profits could be politically controversial and may discourage investment in energy infrastructure.

The result? Businesses and households feel the pinch, while the “big six” or other major suppliers appear largely insulated from public criticism.

The Impact on Business

• Rising electricity bills reduce competitiveness, especially for energy-intensive SMEs and industrial sites.

• Uncertainty in budgeting makes procurement and energy planning more difficult.

• Calls for action: Some businesses are looking for alternatives, including onsite generation, energy storage, and flexible procurement strategies to offset these charges.

What Could Change?

1. Government scrutiny of energy company profits

   • Calls for windfall taxes or temporary profit caps have resurfaced, especially in periods of high consumer cost.

2. Targeted regulation of charges

   • Greater transparency in how network upgrades are funded could create pressure to rebalance who pays.

3. Business-led advocacy

   • Industry groups and trade bodies could push for a fairer allocation of costs between consumers, businesses, and energy companies.

Conclusion

Businesses are paying more for electricity, largely due to third-party network charges. Meanwhile, energy giants continue to post record profits. The tension between infrastructure investment and profit-taking raises a key question: why can’t government policy ensure that the cost of decarbonising the grid doesn’t fall disproportionately on businesses and consumers?

Businesses don’t have to take these costs lying down. At CEB, we help companies understand their energy bills, manage exposure to rising charges, and explore strategies like onsite generation, storage, and smart procurement.