Network charging compensation: what it means for energy intensive industries
15 August 2024 | 5 minutes
Eligible energy intensive industries (EIIs) have until 31st August to register for the Network Charging Compensation (NCC) scheme in order to claim up to 60% compensation on their network charging costs. But what is the NCC and how does it fit into the UK government’s wider plans to support British industry? How can EIIs benefit from the compensation, and what steps must be taken to receive accurate and timely rebates?
The British Industry Supercharger scheme: supporting UK industry
In the UK, EII sectors that are eligible for Department for Business and Trade relief schemes employ around 400,000 people and add £30 billion to the UK economy1. These sectors include a number of key foundational and infrastructural industries, such as glass, cement, steel and chemicals, and form part of critical supply chains for other major sectors, such as automotive and aerospace.
Announced by the UK government in February 2023, the British Industry Supercharger (BIS) scheme2 laid out three measures for reducing the high costs attributed to energy consumption for around 300 qualifying energy intensive industries that fall under these critically important sectors.
The three measures are: i) an increase in subsidies under the existing EII Renewable Energy Levy Exemption scheme from 85% to 100%; ii) full exemption from capacity markets costs; and iii) the availability of compensation on network charging costs through the NCC scheme.
Combined, these measures are expected to reduce EII electricity costs by approximately £20 per megawatt hour (MWh), which will help level the playing field for British companies in European markets by significantly closing the price gap with competitor companies in other countries.
What is the Network Charging Compensation Scheme?
The NCC scheme is a mechanism to reduce energy bills for eligible EIIs by offering up to 60% compensation on their network charging costs incurred through the use of the GB National Grid.
The compensation will be provided through a retrospective rebate, starting in April 2025, which will be funded by a new EII Support Levy (ESL) that enacts a charge on all licensed electricity suppliers.
The period from which compensation can be claimed began in April 2024, meaning that companies seeking to apply for a rebate should begin monitoring their network charging costs in preparation for the start of renumeration next year.
Which EIIs are eligible?
For EIIs to be eligible for the NCC scheme, they must hold a government-issued EII Exemption Scheme certificate. This document contains the details of the holder’s exemption and demonstrates that eligible businesses qualify for both the NCC scheme and further BIS measures once these schemes commence.3
Application forms for businesses seeking EII exemption can be found on the government website.4 Additionally, it’s important to note that certificates typically hold a validity period of up to one year and businesses will need to re-apply every year for documents to remain valid.
There are four main criteria that businesses must meet to be eligible for an EII Exemption Scheme certificate:
The business must manufacture a product in the UK within an eligible sector (defined by a 4-digit NACE code).
The business must show that their electricity costs amount to 20% or more of their Gross Value Added over a defined reference period.
The business must have at least one quarter of financial data.
The application must contain evidence of the proportion of electricity used to manufacture the product for a period of at least three months.
Each requirement has a set of sub-criteria which also must be met, so companies seeking an EII Exemption Certificate should refer to the government’s full guidance.5
How and when can businesses apply?
Businesses looking to take advantage of the NCC scheme should start by familiarising themselves with its requirements and ensure they hold a valid EII Exemption Scheme certificate, available from the gov.uk website. Potential applicants should also register for the NCC scheme, start to accurately monitor their network charging costs and submit their quarterly NCC scheme applications to ensure they receive the correct compensation when the rebate period opens in April 2025.
The application window for the April 2024 to June 2024 quarter is now open and will be closed by 31st of August. If you are an eligible EII customer, you will need to register for the NCC scheme and apply for previous quarter by this deadline. Guidance on how to register and submit your quarterly applications can be found here.
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