Targeted Charging Review (TCR): three words that have frustrated business owners and professionals responsible for business energy for almost three years.
Finally, some clarity is emerging around how the changes will be implemented and where businesses can monitor the effect on their bills.
What is TCR?
Two of the non-commodity costs on business’ electricity bills, itemised as TNUoS (Transmission Network Use of System) and DUoS (Distribution Network Use of System), are being removed and re-distributed in other charges.
Ofgem (Office For Gas and Electricity Markets) has introduced this due to uneven distribution of these charges between large and small business consumers. This is partially due to load-shedding strategies employed by larger consumers, which means they are not contributing equally to maintenance of the country’s electricity network.
What are the changes?
TNUoS changes have been delayed for a second time and will come into effect in April 2023, whilst DUoS changes will take place in April 2022.
The new TNUoS charges will be banded based on a business’ agreed supply capacity (ASC), also known as its kVA, and applied through other areas of the bill. At Great Annual Savings Group (GAS), we’re increasingly finding that these are being applied through the standing charge in the short term by most suppliers.
Both TNUoS and DUoS replacement charges will be dependent on region and will be calculated using the 24-month period ending in 2020. This applies to businesses on non-half-hourly supplies as well as larger half-hourly consumers.
The largest criticism of TCR is from those who have employed renewables on-site. The incentive to harvest renewable power and utilise it during annual periods of peak consumption (Triads) has been removed. This has been a valid load shedding tactic for some time and has helped larger consumers manage their energy costs, but is now seen by Ofgem as businesses avoiding paying their share.
TCR has been criticised by the clean energy sector for creating a barrier to adoption and punishing those businesses who have been pro-active in generating clean energy.
Liam Stoker, Editor-in-chief at Current+, wrote: “Various studies have countered Ofgem’s analysis, drawn up by Frontier Economics, claiming that the policy stands to wipe £2.50 off the value of each megawatt hour generated by renewables, damaging project economics and wiping multiple gigawatts off of post-subsidy pipelines.” Such fervent criticism has resulted in the launch of another review, the Strategic Charging Review, which is worth keeping an eye on.
What you can do to determine the impacts on your bills
The District Network Operator (DNO) in your area can advise you on what band your business will fall into, based on ASC.
If you would like a more holistic appraisal of your future energy costs, or someone to carry out engagement with your DNO on your behalf, Great Annual Savings Group can offer free advice in this area.
GAS works with more than 11,000 UK businesses to monitor and reduce their variable costs, including insurance, water, payment machines, energy, and more. Our team of more than 300 cost reduction experts can also advice on advanced strategies to reduce business’ energy usage, as well as attaining the most suitable procurement cost. Speak to us for a free, no-obligation chat about TCR today on 0800 130 3514 or visit our website for more information.