What is the Targeted charging Review (TCR)?
The way we generate and use Electricity is changing, so the government is reviewing how network charges are collected, with an added focus on recovering a fair share from each customer. As part of its ongoing work to create a fairer energy network, the industry regulator Ofgem launched the TCR in 2017, which assesses how network charges should be set and recovered in Great Britain.
The current system allows some consumers to reduce their demand at peak times in exchange for lower network charges. This does place an additional financial burden on those that do not or cannot shift their usage to “cheaper” times of day.
What are the changes?
Going forwards there will be a greater emphasis on fixed charges based on the type of customer, metering and expected use. Banding will likely be whether the supply is for households, unmetered (e.g. streetlights) or for business customers. Business customer banding is likely to consider total Electricity consumption or Available Capacity (the maximum amount of load you can take from the network at a single point in time).
Transmission charges were due to change April 2021, moving away from being collected via the consumption-based Triad periods over winter. Due to delays in issuing guidance to energy suppliers, this has moved to April 2022. Distribution charges will have a greater element of fixed costs, moving away from Red, Amber and Green time bands, with changes also planned for April 2022. Combined, these charges account for about 25% of the overall cost of your bill.
This delay does avoid what was a high risk of fixed price Electricity contracts being opened by suppliers from April 2021, to factor in these changes at short notice. However, until there is clarity, prices from April 2022 are unlikely to truly fixed. Additional changes are expected from 2023 to look at the remaining industry charges, based on when Electricity is used. For example, incentives to avoid periods when Electric Vehicles will be charged.
What it means for businesses
If you have a fixed price Electricity contract that goes beyond March 2022, it may be that your energy supplier could review the charges. This is by no means certain and will depend on each supplier’s view and the final details, which as of October 2020 have yet to be published.
Also, as this is intended to be a project to recover the fixed charges required for the Transmission and Distribution of Electricity, there will be those that see little change and of course those that will pay significantly more or less than they currently do.
Until further guidance is published, the industry is unable to say what the impact will be for individual customers.
Please do not hesitate to contact us, as we can make sure you are informed as things develop or look for an energy supplier which is committing to honouring fixed prices through to April 2022.
If you would like any more information, please feel free to contact Indigo Swan.
Telephone: 01603 625522