What Does the Targeted Charging Review Mean for Your Business?

May 7, 2021 by Admin

Ofgem (Office of Gas and Electricity Markets) essentially oversees the energy market in the UK, helping customers whilst working towards a fairer energy system for all.

Established in 1999, Ofgem has been regulating gas and electricity companies ever since, reviewing and implementing policies to make the market as fair and transparent as possible. The Target Charging Review is yet another example of this.

Coming into effect in April 2022, Ofgem’s TCR is shaking up the way suppliers are charged for getting energy from A to B. But how will this actually impact your business energy bills?  Here’s our quick guide to the TCR and what this means for your business.

 

What is the Targeted Charging Review (TCR)?

The TCR was launched back in 2017 by Ofgem to review the non-energy costs of maintaining the electricity networks in the UK and how these charges are met by both businesses and residents.

 

Why Did Ofgem Review the Charge?

This review was ultimately introduced to make the charges fairer, ensuring that similar sized energy consumers pay similar amounts. It will also prevent businesses from avoiding certain charges via load shifting or other means.

What is Changing?

Ofgem will change the way in which suppliers are charged for both:

• TNUoS (Transmission Network Use of System)- cost of getting electricity from a power station to the distribution station
• DUoS (Distribution Use of System)- cost of getting electricity from the local distribution network to your business

The two above are split into two costs:

• Residual- costs to maintain the network
• Forward looking- costs of expanding the network

The April 2022 changes will only affect the residual cost, which constitutes 90% of the TNUoS and 50% of the DUoS.

In English Please?

If all the above information is confusing, don’t worry, you’re not alone. The changes essentially mean that network operators will now charge energy suppliers a fixed amount for every business customer site, a cost that was previously built into the unit rate.

 

What Does the TCR Mean for Me and My Business?

While domestic bills are likely to go down, there’s a good chance your business bills might go up, especially if you’ve been avoiding the charge up until now. If your energy contract starts before April 2022, some of your charges will be under the old system before transitioning to the new.