Future Billing Methodology project

Background

The UK Government is committed to achieving net zero by 2050 and is expected to commit to achieving 78% of this by 2035.

These are challenging ambitions, which will demand significant changes across all sections of society.

An important change will be the way we heat our homes and businesses

Today, the bulk of our heating and hot water demand in buildings is met by natural gas. To ensure that the UK can meet its net zero target, we’ll need to find greener alternatives. We believe a multi-faceted approach is required to meet the energy demands of the UK.

For this reason, Xoserve is supporting Cadent in focusing on optimising the use of renewable-source gases such as biomethane and hydrogen-methane blends. Both have a lower carbon content than natural gas and can begin the decarbonisation journey, with the ultimate aim of converting to 100% hydrogen gas.

The challenge: fair billing during the transition

One of the first challenges we need to overcome is that current regulations and billing methodology don’t allow for different calorific values (CVs) within a given Local Distribution Zone (LDZ).

Today, our entire gas supply has a CV of around 39 MJ/m3, while biomethane has a CV of around 37 MJ/m3 and hydrogen gas has a CV of just 12 MJ/m3 (a 20% hydrogen blend has a CV of c. 34MJ/ m3).

Different calorific values cause a disparity in billing

Customers using lower-CV gases would need to use a proportionately greater volume to meet the same energy requirement.

In addition, current gas regulations cap variance in CV to no more than 1MJ/m3 over the lowest value within an LDZ.

We need to ensure customer bills remain fair and equitable

Below, you’ll find resources which explain the challenge in more detail. They also explore the options available to transition to a greener gas mix, whilst protecting consumer costs.

For more information on the Future Billing Methodology project, please visit www.futurebillingmethodology.co.uk.

Consultation

Earlier this year, we shared a consultation to provide you with the opportunity to engage with us about this project.

The objectives of the consultation were to:

• open the debate around how billing could be approached when hydrogen and biomethane are introduced at a larger scale into the gas network
• identify the impacts across industry parties of a variable calorific value
• discover solutions to managing data flows to deliver clear, effective and fair consumer billing during the green transition
• estimate costs and implementation timescales of options to feed into recommendations
• explore options that are not recommended because of costs, compliance, implementation timescales or a combination of all

The five options we asked you to feed back on are:

• Option A: Working within existing framework
• Option B: Embedded Zone Charging
• Option C: Online CV Modelling
• Option D: Zonal CV Measurement
• Option E: Local CV Measurement

Consultation documents

Below are documents supporting the Future Billing Methodology consultation.

Thank you for your feedback – this consultation closed on 1 March 2022

Thank you for taking the time to submit your feedback.