Market Wide Half Hourly Settlement (MHHS) is the biggest market reform in decades and could be a major disruptor to consumers’ energy bills.

Greg Armstrong, Head of Business Change at TEAM Energy, outlines where and why new charges and risks may arise, and how consumers can use utility bill validation and energy bureau services to mitigate them, recover costs, and more.

As new technologies enter the picture, organisations’ energy estates are becoming larger and more complex. Half of UK organisations have workplace EV charging installed, and heat pumps and on-site renewables will soon become common.

The increasing popularity of such technologies will be one of the intended consequences of the Market Wide Half Hourly Settlement (MHHS) programme. Elexon, the organisation that administers the UK’s energy balancing code, has labelled it as one of the ‘biggest overhauls of electricity systems and processes since privatisation and the introduction of the competitive market in 1998’.

The unprecedented reform will revolutionise the UK electricity market. It requires that all energy suppliers settle, i.e., pay the energy generator, their bills for domestic and small to medium (SME) business customers every 30 minutes based on their customers’ actual consumption, when it is available.

Though there is currently the Elective Half-Hourly Settlement (EHHS) mechanism under which similar results can already be achieved, as the name suggests, it is an optional process which has only been embraced and actively used by a small number of suppliers. The large majority of suppliers currently settle their SME customers’ usage based on estimates ranging over a month or more. This explains why only a few suppliers, Octopus, for example, currently offer Time of Use (ToU) tariffs to domestic and SME customers in the market.

As the biggest change suppliers have ever had to implement, MHHS adds further complication and risk for energy consumers already dealing with varied energy estates and energy price volatility.

Our analysis has shown that during periods of ‘business as usual’ up to 4% of bills contain errors. During times of change, the risk of errors and mistakes is the greatest. Energy bureau and bill validation can recover costs, mitigate risk, and help organisations work towards corporate net zero targets.

The potential for new charges because of MHHS
MHHS will be expensive, and the cost of a new industry-wide framework will likely be recovered from energy suppliers who in turn will pass on those costs to consumers. These costs could show up on consumers’ bills as additional pass-through charges, the fees that suppliers pay to other organisations for their services which they ‘pass through’ to the end user.

Currently, customers pay several pass-through charges, including the Transmission Network Use of Systems (TNUoS) and Distribution Use of Systems (DUoS) charges. These and other pass-through charges can be as high as between 40-60% of companies’ energy bills. Notably, like the TNUoS and DUoS charges, they are difficult for organisations to validate, making any cost errors hard to detect and recover.

There will also potentially be charges for customers without smart meters that can send half-hourly data to the suppliers. These customers will need manual meter readings, and suppliers will probably issue ad hoc fees to read meters manually.

Bill validation can combat new charges with up to nine times return rate
Energy bureau services help prevent organisations being overcharged or charged incorrectly as new and complex charges are added to their bills. As the amount of data increases due to the frequency of raw data being collected, automated bill validation services can ensure accuracy along with cost recovery.

Accurate bill validation can recover nine times the cost of the service alone.

On top of this, if any new pass-through charges turn out to be similar to the TUoS and DUoS and are difficult to validate, end users will have to choose solutions that can deal with the full spectrum of potential network charges on future bills. The bill validation solutions that are currently most comprehensive will have the best chance of capturing and validating any newly introduced charges too.

Flexible tariffs – more complex, but more opportunity
As stated, MHHS depends on smart meters to capture the vast amount of data that suppliers and the HH settlements process will need. Organisations that can access and analyse that data will be able to act on it more effectively. With MHHS all suppliers will now be charged for the actual consumption of their customers. We can realistically expect this to lead to an increase in the variety of tariffs available and the introduction of more Time of Use (ToU) tariffs for those organisations ready to switch to them.

To make the switch businesses must have a good handle on their energy estate data, and they must be capable of providing their energy managers with dashboards to interpret and easily and quickly interact with that data. For multi-site energy estates, granular data collected by an energy management bureau or a bill validation solution creates the opportunity to more easily identify and benefit from specific tariffs for different sites and periods.

At the same time, ToU tariffs and energy data can open the door for organisations that don’t yet have low-carbon technologies to add renewables into their portfolio. Energy managers will be able to see when they’re using energy and either simply move to tariffs better suited to their usage or actively change their usage profile and sign up to tariffs that encourage consumption outside peak hours, when prices are cheaper. Organisations may want to add battery storage to take advantage of this.

Similarly, new tariffs will likely reward customers for self-generation and putting energy into the grid during times of demand. Adding on-site renewables will unlock these benefits and reduce an organisation’s emissions, helping to achieve corporate net zero targets.

While adopting these new low-carbon technologies may sound like an additional burden, having the right energy management and bill validation solution in place avoids that issue. It enables the adoption of low-carbon tech and alleviates the demand of managing it.

On top of this, the right solution will also free up the resources of energy management teams and allow them to focus on other critical and strategic energy management or carbon reduction projects.

Be an early adopter
Despite new charges and increased risk of errors, organisations who engage an energy bureau service can take these challenges in their stride. The greatest cost savings are likely to be had in the early days, during and after the implementation of the change, and, therefore, by the customers that can react to the change the quickest. Over the longer term, more accurate bill validation can recover significant sums, while also making way for new opportunities in the form of flexible tariffs and low-carbon technologies.

Find out how TEAM’s energy bureau service can help recover costs

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