131 Vauxhall road, Liverpool 0800-058-4297 info@utility4business.com
blog image

Targeted Charging Review

What is Targeted Charging Review?

All consumer bills will impact in some way by the Targeted Charging Review (TCR). Ofgem has reached a conclusion on the Transmission Charge Review (TCR). 

It will result in modifications to the billing structure for both the Transmission Network Use of System (TNUoS) and the Distribution Use of System (DUoS).

What Are TCR Charges?

As of the year 2020, TNUoS and DUoS costs will each account for 15% of a customer's monthly power bill. This is the cost of transporting and distributing power, which also includes additional expenditures such as maintenance, installation, and monitoring. This cost incurs from the point of generating all the way to the final customer. 

In certain circles, they sometimes refer to as non-commodity expenses. Over 60% of a consumer's overall bill comprises of non-commodity-related expenses.

In recent years, there have been adjustments to the prices of these non-commodity charges. This is to more accurately reflect the expenses of the national grid and electrical systems at the time. 

As a result, Ofgem has suggested yet another modification to the tariffs. This is to more correctly represent the existing cost to maintain and run the systems that are already in place. The TCR is another name for this component. 

Ofgem estimates that the savings that would result from the equitable distribution of these costs among customers will amount to between £4 and £5 billion by 2040.

It was initially anticipated that the revised TCR would be implemented starting in April 2021 for Transmission Fixed Charges. However, owing to delays, it will now be in effect starting in April 2022 along with Distribution Fixed Charges. 

What will be different?

The following is a list of the primary modifications that are under suggestion for non-commodity costs:

Instead of the existing triad system, TNUoS will be a set fee. It is dependent on available capacity and is expressed in pounds per day.

The present technique, which focuses more on the amount of time using the service, will replace. The new DUoS will have a set price depending on available capacity (£/day).

Instead of a price based on net demand, the BSUoS, which stands for Balancing Services Use of Systems, will be a gross demand charge.

In the present triad system that is in place for TNUoS charges, big firms are bill base on the three (tri) largest peaks that occur throughout the winter season. Customers may avoid being charged by moving their load during the three peak hours, which can be forecasted in advance. 

If they are aware of when the peaks will occur, they will be able to reduce the amount of energy. Large organizations have the potential to see huge reductions in their monthly expenses if they steer clear of these charges. 

However, these charges should account for more than 15% of your TCR energy bill.

There will be a new system of bands that non-domestic customers will fall into to set their fixed charge levels. On the other hand, domestic users will only have one residual charge. 

Because of this, suppliers will have to make modifications to their invoicing systems. This is to take into account the TCR changes.

What exactly does this imply for my situation?

At the moment, some customers have been able to steer clear of the non-commodity costs. They lower their consumption during peak times, which impacts the calculation of triad costs, and increase their consumption during non-peak times, such as on the weekends or at night. 

This strategy has allowed them to steer clear of the non-commodity costs. The process is what we call load shifting.

This indicates that a customer may utilize load shifting. This is to use the same amount of TCR energy as someone who did not load shift. However, this greatly cut the bill by avoiding the TNUoS and DUoS costs by not using load shifting. 

Therefore, the costs should be spread equally among the many customers.

Consumers have access to a variety of tools and technologies. It may make the load-shifting process more efficient. A significant number of them spend significant amounts of money on the deployment of these tools and technologies. 

This would have been to their advantage in the long run since it would have freed them from the obligation of paying the non-commodity fee.

Ofgem TCR Initiative

Ofgem has taken active action to solve this issue by proposing modifications to the TCR that will overlook the existing impact of load shifting. This will ensure that these costs cannot be avoided and that each user will be charged fairly for the TCR energy they consume.

The authority in charge of regulating the industry has indicated that the modified TCR would result in domestic home consumers paying lower fees on average. 

Consumers who use electricity for non-domestic purposes will be subject to higher fees, and those who have been successful in avoiding fees in the past by changing their load will feel the most effect. 

They also mentioned that non-domestic customers who were unable to load shift would see some cost reductions in the future.

The total prices of non-commodity services will vary depending on which band of consumers an individual belongs to; nevertheless, Ofgem warns that customers who experience the greatest rises will benefit from long-term savings when compared to the existing TCR structure.

The new TCR will, in addition to safeguarding consumers, assist achieve net-zero ambitions within the sector by encouraging reduced usage owing to unavoidable expenses.

If consumers have to pay a higher price for their energy, they are more likely to reduce the amount of carbon dioxide they emit.

How can I lower my expenses right now?

The new fixed price calculation is according to the capacity in kilowatt-hours (kVA). It establishes which category of non-domestic user you belong to. 

When a company has a bigger capacity, it will be placed into a higher band. It means it will get a higher amount of fixed costs. Therefore, if you decrease your capacity, you can continue using the same amount of energy. 

You can do so while simultaneously lowering your monthly price.

Huge energy users that need large capacities may need help to make this modification. This is because they need their full capacity in order to function. Only companies who already have available capacity to spare would qualify for this.

Because of the fines that are in place for exceeding the maximum value, a great number of companies will have the capacity.

Therefore, over the course of the last several years, a significant number of customers will have accumulated an excessive amount as a hedge against the possibility that they may go over their limit and be subject to the payment of significant penalty penalties. 

Hence, this may be handled to lessen the strain on your consumer band.

One apparent choice is to cut down on the amount you consume in general. Investing in more energy-efficient utilities that either cut down on or eliminate energy waste might be one solution. Because of the new TCR, investments made into demand slide reduction (DSR) technologies, which previously assisted in load shifting, are now rendered ineffective. 

However, companies should make an effort to cut down on their consumption. This is to achieve net-zero objectives and adhere to social ideals.