The AAHEDC charge, explained.

What AAHEDC pays for, and who sets it

Distributing electricity to a sparse population over a very large area costs more per customer than to a dense one. Left alone, that difference lands on the network charges of everyone connected in the north of Scotland. The scheme spreads it across Great Britain instead.

The power comes from section 184 of the Energy Act 2004, which lets the Secretary of State establish a scheme where distribution costs in an area are significantly higher per customer than elsewhere and at least 100,000 premises share a distribution system. The area is set by order: SI 2005/528, whose Schedule 1 describes the north of Scotland, still the only Specified Area. An earlier arrangement called Hydro Benefit ended in January 2004, and this replaced it.

NESO runs the scheme under Condition F8 of the Electricity System Operator Licence, outside the CUSC that governs transmission charges and balancing charges. It recovers a Total Scheme Amount from every licensed supplier and pays the Assistance Amount and the Shetland Assistance Amount to Scottish Hydro Electric Power Distribution, which must use them to reduce the use of system charges it levies. The money funds no project. It buys down the distribution charges of somebody else.

For 2026/27 the Total Scheme Amount is about £121m: an Assistance Amount of £85,038,140.89, a Shetland Assistance Amount of £34,938,996.63, an Administration Allowance of £157,784.06 that NESO keeps for running the scheme, and a Correction Amount of £1m for under-recovery in 2025/26. The first three are inflated each year by consumer price inflation including housing costs, measured May to October, which was 4.05% for this uplift.

Who pays it, and on what volume

Licensed suppliers are liable, and they recover it from customers as a pass-through charge. NESO invoices a supplier on the consumption attributed to its own balancing mechanism units in settlement, the same population of demand it used to set the rate.

The volume is not the number on your meter

This is the part that catches people checking the line by hand. NESO derives the tariff by dividing the Total Scheme Amount by its forecast of the energy consumed by the customers of licensed suppliers at grid supply points, not at meters. The volumes it invoices against are settlement volumes, and settlement takes metered consumption up to a notional grid supply point using line loss factors, the multipliers for electricity lost as heat on the distribution network. A supplier passing the charge on the basis it was billed on will therefore invoice slightly more than the tariff times your meter reading.

What it costs, worked through

The charging statement carries a worked example of the supplier side. A supplier whose units record 1.5 billion kWh in a quarter is invoiced by NESO as follows.

Settlement volume for the quarter

1,500,000,000 kWh

Total Scheme Energy Consumption Tariff, 2026/27

0.044269 p/kWh

1,500,000,000 x 0.044269, divided by 100

£664,035.00

At the scale of one site the arithmetic is identical and the numbers are small. Take a site consuming a million kWh a year, which is an assumption, at the published tariffs, which are not.

Consumption assumed for one site, over a year

1,000,000 kWh

At the 2026/27 tariff of 0.044269 p/kWh

£442.69

The same site at the 2025/26 tariff of 0.040984 p/kWh

£409.84

Increase on unchanged consumption

£32.85, or 8.0%

Both are before line losses, so a bill on the settlement basis comes out a little above the second. AAHEDC is among the smallest lines on a business electricity bill, and the reason to reproduce it is not the money. It is that a line nobody checks is a line that stays wrong.

Two things are visible there. The tariff is not a ratchet: it fell in 2025/26 because the year before had over-recovered. And the draft is always close to the final and never identical, which is the next section.

Where it appears on your invoice

There is no standard line name. The same charge is printed under all of these, and on many bills not printed at all.

How to check it

The charge is small enough that nobody audits it and simple enough to reproduce in one line. Four things are worth confirming.

• The charging year. The tariff changes on 1 April. A billing period crossing that date has to be split, with each part priced at the rate for the days it contains.
• The rate itself. One national figure, published by NESO to six decimal places. No regional variant to look up, no band to get wrong.
• The basis of the volume. Above the tariff times your metered units is expected on the settlement basis. Below it, ask why.
• Whether it is counted twice. A contract that fixes AAHEDC inside the unit rate, and a bill that also itemises it, charge you for the same levy in two places.

What is changing

Nothing structural is in flight. The last material change took effect on 1 April 2023, when the three-yearly government review removed the embedded benefit, so suppliers are now charged on gross demand with no netting of exporting units. It came through SI 2023/43.

What changes every year is the number. The 2026/27 tariff rose 8.0%, driven by inflation of 4.05% on the assistance amounts and by the unwinding of an over-recovery that had held 2025/26 down. The forecast for 2027/28 is due at the end of March 2027, and the final tariff by 15 July 2027.

Deep dives and edge cases

The main path above is the whole of the charge. These two questions come up often enough to answer, and not often enough to interrupt it.

Questions