You may have heard talk of electricity price hikes from April 2022 as a result of the TCR. But what exactly is TCR and how could it affect your bottom line?
In August 2017, Ofgem launched the Targeted Charging Review (TCR). Aiming to make network charges non-discriminatory and fairer, the project was designed to assess how non-energy costs (network maintenance) paid by businesses should be set and recovered in the UK.
Currently the network charge rates for transmission (TNUoS) and distribution (DUoS). Made up of two parts, the signal charge (also known as forward looking) supports the development and expansion of the network, and the residual charge (revenue collection) covers the cost of maintaining the existing network. Phase one of the TCR aims to change the way that the residual charge is collected and will effectively separate it from the signal charge.
Moving forward, residual charges will no longer be calculated on a £/MW basis. Every commercial meter point will be banded depending on its annual consumption (WC meters) or maximum installed capacity and voltage (CT meters). Charging on a £ per site basis, standing charges will be impacted, whilst certain elements of the p/kwh unit charge will be reduced. Despite the recent Covid pandemic, the changes are set to take effect from April 2022.
How would this affect businesses?
Because of the way that TCR will be structured, consumers would no longer be able to avoid certain costs through load shifting during peak time.
Embedded generators which currently earn benefits by spilling electricity to the local distribution network will also see a reduction in embedded benefits, although it’s not clear what the full impact will be until the individual bands and tariffs have been released by National Grid. There is a process available to consumers to challenge their allocated banding directly with their local network operator, should they disagree.
With the likelihood that new fixed charges will be added to the standing charge, or, in some cases, with half-hourly meters, increased capacity charge, individual sites could see substantial changes in their bill. It’s imperative then that businesses are aware that this levy is included in their contracts.
What if your contract starts before the new charge period but finishes after it?
If your contract starts before the new charge period (April 2022) but ends after that time, it is likely that you will be charged under both the old and the new scheme.
To make an informed judgement, it’s advisable to check that your supplier has included TCR in the quote. Above all, always check the fine print.
Although the charges are changing, the cost impact may not necessarily lead to an increase for all customers.
Here to help
If you have any concerns about the allocated banding or TCR in general, and, would like to have a no-obligation conversation with us about how these new levies could affect your business, get in touch. We’d be more than happy to have a call to discuss how we could support you to maximise your contract whilst minimising costs.