If you like to stay on top of any future energy cost changes that could affect your business, you’ll no doubt already be aware of Ofgem’s Targeted Charging Review (TCR). Having been in effect since April 2022, the TCR established a new system by which network owners charge energy customers for the use of the electricity networks in the UK.
Here’s a recap of the main things your business needs to know about TCR…
The TCR is an Ofgem-led project that assessed how network charges are set and recovered. Launched in August 2017, the intention behind the TCR was to decide whether the system needed to be reformed to make it fairer. It addressed the concern that the current mechanisms used to recover Distribution Use of System (DUoS) and Transmission Network Use of System (TNUoS) charges could lead to inefficient use of the network and create an adverse effect on consumers. The Triad system used up until then saw half hourly (HH) metered customers charged for electricity transmission costs according to their consumption during the three half-hour periods in Winter when overall demand on the grid is at its peak. Ofgem was concerned that this system distorted the market by encouraging some businesses to shift their consumption to avoid Triad periods and not pay their share towards maintaining the grid year-round.
TNUoS
Based on the findings of the TCR, Ofgem decided to supplement the Triad consumption-based system for TNUoS with a banding-based daily charging system that should ensure all businesses pay their share towards the upkeep of the grid.
DUoS
DUoS tariffs have always had a fixed daily charge component. But as part of TCR, Ofgem directed that the way DNOs (Distribution Network Officers) set this charge should also change – moving some of the cost recovery that previously came through the volume-based rates into the fixed daily charge.
The banding for each meter on businesses’ site(s) is now based on their agreed supply capacity (if there has been one agreed) or their Estimated Annual Consumption (EAC) if an agreed supply capacity is not in place. Changes to DUoS tariffs went live in April 2022 and changes to the TNUoS charges came into effect in April 2023.
For larger businesses able to reduce or shift energy volumes, winter Triad periods previously provided an opportunity to make savings through flexibility by reducing consumption during peak periods. Even those who weren’t able to be flexible in their usage could mitigate the impact of Triads by increasing their energy efficiency. Since the new system, Triad avoidance is no longer possible for many and, where it remains, the benefits are significantly reduced. This means that businesses who used this method to reduce their TNUoS costs might have found their annual energy bills have increased. For businesses previously able to boost generation revenue by exporting energy to the grid at peak times, the reduction of Triads could have affected their bottom line and reduced the benefits of having on-site generation. While businesses who participate in grid-balancing Demand Side Response schemes are still able to benefit from doing so, they will have lost out on the additional revenue available during Triad periods.
For some, the TCR has meant a bigger energy bill and a need to rebalance the budget in other ways. But large energy users who had previously been unable to consume energy flexibly and had therefore been hit with excessive Triad costs could have seen a reduction in non-commodity costs.
Each year, National Grid ESO publishes the fixed TNUoS charges, which take effect from 1st April for the following 12 months. To see the latest TNUoS charges, daily and volume-based, please visit here.
At Bryt Energy, we’ve clearly stated the TCR banded charges in our new contracts since September 2020, in order to give our customers as much visibility of their costs as possible.
And because our operations are built to be agile, our prices will always reflect Ofgem’s latest position and advice, if there are any future changes.
Whilst the opportunities of Triad avoidance have been significantly reduced, now is the time to consider how you can optimise your electricity usage more continuously across the year and boost your revenue in other ways. For example, organisations can save money or access new revenue streams by adjusting their consumption (within agreed limits) in line with the grid’s needs, without impacting their operations. You can learn more about the benefits of optimising your electricity supply, here.
If you have any questions around TCR or how we’re supporting our customers through the changes, please get in touch with our team at heretohelp@brytenergy.co.uk.
