What Is a Pass-Through Energy Contract
Pass-through means “we will invoice you at whatever the network or the government actually charges us”—useful when policy costs fall, painful when DUoS red-band rates jump after a DNO price control review. It is not the same as a tracker on wholesale power; think regulated add-ons first.
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Key takeaways
- Fully fixed deals still move if the contract says elements are “cost reflective” or subject to material change—circle every exception on the schedule.
- DUoS (Distribution Use of System) is the usual first pass-through on half-hourly meters; suppliers receive granular invoices from UK Power Networks, SSEN, Northern Powergrid and simply pass the p/kWh lines through with or without markup.
- BSUoS swings with National Grid balancing actions—stormy weeks with heavy wind curtailment can double the pence-per-kWh adder versus calm months.
- Ask for a sample bill layout before signature; if it only shows a blended rate, you cannot audit whether passthrough is fair later.
Why salespeople love “flexi with passthrough”
Retail risk desks prefer transferring volume volatility to you when cables overheat or policy levies spike. The headline commodity rate looks sharp—say 24.9p—because the supplier padded less margin into that slice, knowing DUoS could add another 3–6p in congested cities like London or Birmingham.
An East Anglia cold-store signed with SSE Business Energy assumed “fixed meant fixed.” Their schedule listed “commodity + imbalance + BSUoS passthrough.” When Grid bought emergency reserves during a January ANT-North bottleneck, BSUoS added 0.8p for six weeks—small per kWh, but £1,900 on 235 MWh usage. Legal? Yes—the wording allowed it.
Typical UK pass-through buckets on invoices
| Line label | What moves it | Who publishes the reference price |
|---|---|---|
| AAT / DUoS generation | Your half-hour shape vs DNO time bands | Local distribution network operator |
| BSUoS | System balancing buys/sells | National Grid ESO settlement files |
| CfD/FiT reconciliations | Quarterly LCCC adjustments | Low Carbon Contracts Company data |
| Capacity market (relatively rare on SME) | T-4 auction clearing prices | EMR Delivery Body publications |
Negotiation tactics that actually work
Request a price cap on pass-through volatility—some mid-market desks agree quarterly maximums (£/MWh) if credit is strong. Alternatively, accept passthrough on DUoS but insist commodity + BSUoS stay fixed; that split hedges the scariest balancing swings.
Pair this page with pass-through charges explained for legacy acronyms, and cross-check the contract wording using how to read a business energy contract so every “subject to change” clause is highlighted before you countersign.
If the bill jumps, what can Ofgem actually do?
Ofgem does not set DUoS numbers—that job sits with the ten electricity distribution network operators under RIIO price controls reviewed every few years. What Ofgem does police is whether your supplier applied the published methodology and explained it clearly. If the contract truly disclosed pass-through, your complaint route is first the supplier, then Energy Ombudsman ADR if you are eligible and the deadlock letter arrived.
Where firms win cases is mis-selling: marketing slides promised “fully inclusive” while the schedule contradicted them. Keep PDFs of webinars, screenshot WhatsApps from brokers, and timestamp emails. The regulator’s enforcement queue is full of hybrid tariff rows where evidence beat fine print.
Mini scenario — printer in Milton Keynes
A 900 MWh/year print house compared two March-2026 offers from TotalEnergies Business and Engie. Option A fixed commodity at 27.1p but passthrough DUoS; Option B charged 29.4p fully bundled. Finance modelled DUoS using the last twelve HH sheets from Western Power Distribution (now National Grid WPD). Expected pass-through averaged 2.4p, peak months 3.2p. Breakeven sat at 29.0p—they chose Option A and banked £18k over 24 months when winter DUoS stayed mild, accepting the residual balancing risk via a £5k provision.
Gas pass-through is a different animal
Commercial gas contracts may pass through shipper commodity costs, system uplift charges in the Network Code, or capacity bookings at entry points. Unlike electricity DUoS bands you can sometimes optimise with load shifting, gas shape is harder to sculpt without hardware. Pubs aggregating multiple MPRNs under one buying group should insist each schedule states whether transmission or distribution elements float independently; otherwise a cold snap can lift every site at once while draught lager sales slide.
VAT at 5% or 20% and CCL reliefs still apply to the commodity slice even when network lines pass through—finance should map each bill line to its tax treatment so quarter-end returns do not drift. If you are weighing whether to absorb volatility on power alone, read flexible vs fixed contracts for a worked comparison of who should carry market risk.
Three questions your FD should ask before any passthrough deal
First, can we model the last 24 months of each pass-through line with publicly available data, or are we blind to variance? Second, does the supplier add an explicit p/kWh management fee on top of the regulated charge? Third, if Ofgem or the DNO reprices mid-term, who eats the lag between regulatory publication and billing system updates? Satisfactory answers get a green tick; hand-waving gets a fixed alternative from another retailer.
What do you want to do next?
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