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Unidentified gas in the UK

Gas flame

Larger than expected increases are set to impact our gas bills due to an inconspicuous revision of an outdated cost passed through to consumers for unidentified gas (UIG).

All gas suppliers (and therefore supplies) are now affected by the increase in charges in unidentified gas. This increase in cost is included in gas bills but gas consumers will not see these additional costs because they are hidden within the gas price.

The new higher charges have come to light since the implementation of Project Nexus (June 2017). This was a project started in 2007 to replace the old and outdated database managed by Xoserve (the Central Data Service Provider for Britain's gas market) to give the gas industry more accurate information due to the transition to SMART metering.  

The new UIG process was designed with the intention of providing a more accurate view of the amount of unidentified gas that is being used across the UK. Before the implementation of Project Nexus this charge was split according to suppliers' market share and was estimated and often incorrect.

For example all gas supplies using less than 73,200 kWh per annum where classed as domestic and did not have a usage assigned to it. These supplies (normally domestic and smaller consumers) continued to pick up the cost of any gas that could not be reconciled for metered consumption as a result of gas theft or metering errors.

Since the implementation of Project Nexus in June 2017, the industry has seen significantly higher than anticipated levels of UIG across the industry which has led to higher charges for suppliers and as a consequence yet another charge for consumers to endure.

Pre-June 2017 the cost incurred by consumers for this charge was between 1 per cent and 2 per cent of the total gas bill. Post June 2017 the average monthly costs are between 6 per cent and 11 per cent. Even with supply reconciliations, so far there hasn’t been any significant reductions to these costs and the current unexpectedly volatile prices for UIG is compounding the problem as suppliers build this price uncertainty into their gas prices.

What are suppliers doing to redress this? Suppliers are currently joining forces through their industry trade association (ICoSS), and are actively lobbying the industry including Xoserve and OFGEM to support initiatives and actions to reduce the levels of UIG and remove volatility.

According to a post on its website by Sian Baldwin, CEO of Xoservce, addressing the high levels of UIG is one of the industry’s highest priority issues. It remains to be seen how and when this issue affecting consumers’ pockets will be resolved.

 

Further information

Contact Savills Energy

 

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