Ofgem’s targeted charging review will change how suppliers price your future electricity contracts. All TCR changes were initially planned to be implemented by Ofgem in April 2022, however, there is now expected to be a delay in the implementation of some of these changes.
The distribution network is the network transporting your electricity from the generator to a local substation, voltage is then reduced and the electricity transported through our distribution network to most end users.
What is changing?
The aim of TCR is for businesses with similar electricity usages to pay similar amounts to maintain and expand our grid. The current methodology allows businesses who can reduce consumption during peak cost times (typically weekdays 4pm – 7pm) to avoid paying these higher costs which is unfair on businesses who cannot demand manage.
The main charges to be affected are your DUOS (Distribution Use Of Systems) charges and TNUoS (transmission network use of system charges). These two charges make up part of your electricity network costs. Electricity network costs account for approximately 25% of your electricity invoice as summarised in the graph below.
Which charges are changing?
Transmission and distribution charges are split in to two parts;
Residual which is the cost of maintaining the electricity network.
Forward looking which covers the cost of expanding the network.
The TCR charging review only affects the residual charge which is 90% of transmission network costs and 50% of distribution network costs.
How will TCR affect me and my business?
Most suppliers are adding the fixed charges in to your invoice standing charge rather than within the unit rates. If a supplier chooses to add TCR charges to unit rates there is a risk to you. If your consumption falls it is likely suppliers may reconcile for the additional costs required to pay your network operator.
On your renewal quotes from April 2022, it is likely your rates will look different than they have in the past with a higher fixed standing charge but lower unit rates. It is likely businesses who reduced consumption during peak times in the past could see costs increase but businesses who have not been able to reduce consumption in the past see a small saving or these charges stay roughly the same,
What is being delayed?
It is now likely the change from triad-based mechanism of charging to a standardised fixed charge will be delayed 12 months to April 2023.
It is still expected the DUOS based charges will be amended to be captured in a fixed charge will be implemented in April 2022.
For more information on TCR and how it will impact your future electricity costs please contact hello@gleg.co.uk.