Several of our customers have asked us if we could simplify what the Ofgem Targeted Charging Review (TCR) means in terms of changes to the way their electricity charges will be calculated in the future. We asked Inspired Energy’s Jamie Tabord to summarize what is happening and what customers can do.
What Is TCR?
An Ofgem directive that aims to adjust the way revenue is collected from distribution and transmission charges from April 2022.
What Is Changing?
Customers may be aware that the residual element of transmission and distribution charges is currently structured into time periods each day known as the Red, Amber and Green bands. These also contribute to setting the Triad charges, which are retrospectively applied. These will be changing to a fixed charge system based on a site’s Agreed Supply Capacity.
The new fixed charges are also based on bands, with the higher the Agreed Supply Capacity at a site the higher the band that is applied, and therefore the higher the charge.
Who Will Be Affected?
This change will affect every end user with Half Hourly metering, who will likely see an overall increase in Standing Charge costs.
Why Is This Necessary?
The review was deemed necessary because of the changing landscape of the generation mix in the UK, the wider adoption of local and on-site generation, and technology advancements in areas such as battery storage and Demand Side Response schemes. Transmission charges were particularly viewed as beginning to become distorted by an increasing number of end users being able to restrict their demand in peak periods, leaving those that couldn’t manage their energy demand as flexibly to pick up an ever-increasing bill. The regulator, Ofgem, then took these steps to try to ensure that distribution and transmission costs were applied fairly.
How Will This Affect Me?
Customers on pass-through contracts will see the changes from 1st April 2022. Most of the charging items will remain the same, with the introduction of a new Transmission Banded Charge.
It is less easy to predict how this will affect customers on fixed price contracts which span the implementation date of 1st April 2022, and we expect to see an approach set out on a case-by-case, supplier-by-supplier-basis. We will keep customers updated as more clarity is brought to this over the next year.
When Is It Happening?
Changes will come into place from 1st April 2022.
Are Triads Being Scrapped?
Not completely, but Triad charges will be vastly reduced, meaning that the business case for Triad Avoidance activities will certainly change.
What Can You Do?
Because the new charges are set into quite wide bands, there is an opportunity to review your ASC levels to ensure they are appropriate. Customers who can review their current level and safely reduce this requirement could see savings achieved.
- Inspired’s Supply Level Optimisation Service will present a review of your estate with current ASC levels and peak demand levels over the last 12 months, so you are informed where opportunities for immediate savings can be made and to ensure that future charging is accurately applied.
- Complete a full TCR Review. How will your estate be impacted by the changes and is there anything that can be done to mitigate cost increases from 1st April 2022?
For advice or assistance regarding the Targeted Charging Review speak to James Sampson at Inspired Energy on 01772 689250 or by emailing firstname.lastname@example.org