Be aware of rising non-commodity costs: Insights from TEC’s winter energy update

Be aware of rising non-commodity costs: Insights from TEC’s winter energy update

Harrison Miles, Head of Trading, TEC

This winter, energy markets are settling and returning to levels seen at the end of 2025, after some price volatility through January. TEC’s forward buying strategy continues to protect its members from volatile price spikes. However, non-commodity charges are now making up to 60% of energy bills – and they are rising.  To explore what this means for TEC members – and how they might be able to mitigate these costs – we caught up with our Head of Trading Harrison Miles. Harrison explores the key drivers shaping energy supply, wholesale prices and non-commodity charges.   

What is the overall outlook from the energy market update? 

The market fundamentals are strong, with a well supplied market from plentiful LNG deliveries, alongside fairly stable demand, although storage inventories are lower than normal for this time of year. This is balanced against the geopolitical tensions which emerged in the new year – namely the US operation in Venezuela, threats to Greenland and the protests against the Iranian regime. The relative abundance of LNG supplies this year has reduced the UK and EU’s reliance on storage, softening prices. 

What factors could impact energy prices for the rest of the winter? 

In December, a strongly supplied market and milder temperatures saw prices drop to their lowest levels since before the Russia/Ukraine conflict. For the remainder of winter, LNG supplies and storage levels, weather and geopolitical risks are the key factors which could affect prices. The latest weather forecasts suggest there will not be a sustained cold snap which would increase gas demand and storage withdrawals. Geopolitical risks remain, and any escalation of conflicts in the Middle East could impact LNG supplies coming out of the region, particularly through the Strait of Hormuz. This could reduce LNG supplies to the UK and Europe and would likely push up prices. TEC has a rateable forward buying strategy, which means that our members’ exposure to any wild swings in energy costs is significantly reduced.    

What are non-commodity charges and why are they rising? 

Non-commodity charges are charges associated with providing the consumer with gas or power. These are the costs of network infrastructure (pylons, pipelines etc), metering, and the environmental levies which are needed to pay for the net zero transition. The UK’s energy infrastructure is ageing, and investment is needed to upgrade it, which will be recovered through bills of energy consumers.  

The Contracts for Difference scheme (CFD) has recently expanded through contracts awarded in Allocation Round 7 which means CFD costs will too – but this is unlikely to be seen until the end of the decade. However, recent lower wholesale prices have led to an increase in CFD charges in the short term too. Furthermore, there are increases to gas transportation charges of 20-25% from April 2026, which will result in around a 5% increase to the overall gas bill, depending on region.  

How can TEC members mitigate non-commodity costs? 

Unfortunately, some costs can’t be mitigated – standing charges are recovered through a pence/day rate, irrespective of consumption and therefore unavoidable. Other charges, however, are recovered through a volumetric, p/kWh rate. Some of these are flat rates, and the only way to avoid them is to reduce consumption, however, some rates, such as DUoS, vary throughout the day. DUoS is a good example as a time of use charge, as it costs more to consume energy at peak times, and less at offpeak times. By shifting consumption to cheaper times of day, you can reduce your non-commodity costs.  

This is an area which TEC can help advise members on. Setting up an energy working group at your institution is also a great way of promoting joined-up thinking and a strategic approach. 

What are the main takeaways for TEC members from the Energy Market Update? 

We have seen increased volatility in the wholesale market through January, driven predominantly by increased geopolitical tensions. The underlying fundamentals remain strong, and we have seen prices start to settle again as those tensions ease.  

As TEC has a long-term hedging strategy, members’ exposure to this short-term volatility is reduced as we already have significant cover for the closer seasons.  

Non-commodity charges now make up 60% of electricity bills and 40% of gas bills. It’s worth being aware of this and looking into how you can mitigate these costs. You can also look at the MITIE ORBIT portal for a detailed breakdown of your energy costs. 

You can watch the Energy Market Update: Non-Commodity Charges Explained webinar via the link.

TEC is holding a Mitie ORBIT webinar on Friday 6th February exploring how you can use the platform to explore non-commodity charges. Contact your MSA to register.