Targeted Charging Review - Part 1
Targeted Charging Review
The news from OFGEM that it is implementing its Targeted Charging Review (TCR) has sent some shockwaves across the industry. While it’s not a surprise, it will impact businesses financially in the future.
From the initial indicative figures published by OFGEM there will be a significant increase in cost for large Industrial and Commercial (I&C) sites, with the biggest impact on those with a large available capacity and whom have been successful in minimising demand in TRIAD periods.
Targeted charging review how will it effect you
OFGEM announced that as a result of the TCR changes to TNUoS and DUoS charging structures for residual costs will be implemented from April 2021 onwards. A second OFGEM review will consider “forward looking” charges, which are designed to provide pricing signals to consumers to encourage specific consumption behaviour and may further impact of time of use charging.
What do the TCR changes entail:
- From April 2021 the residual charges element of TNUoS will be moved from TRIAD demand to a fixed charge based on site Available Capacity.
- From April 2022 DUoS charging structure will change to place more emphasis on a fixed charged based on Available Capacity with some element of time of use charging remaining.
- Ofgem have used a banding system to decide on the level of charges, these bandings will be based on site capacity and voltage of connection.
- TCR is structured in such a way to ensure that large I&C are prevented from avoiding network residual costs as they currently do through TRIAD avoidance.
As yet, OFGEM has not released any pricing around the new structure. It has released an indicative price on what it estimates it “should” be, but no confirmed prices. For end users the issues are now focused on losing out on load shifting around the red band time of day tariff and also from TRIAD avoidance November-February each year.
There are still opportunities for TRIAD avoidance next winter (2020/21), this is because the changes are due to come into force in April 2021, which means that the TRIAD avoidance window between November 2020-February 2021 can still be capitalised on.
The most pressing issue facing businesses is the Impact on customer costs by this change in the TCR. Those who have worked hard to avoid the winter triads and other peak costs (red band) through demand shifting and shedding have saved money by reducing consumption at high peak times when the kWh avoided in these time zones is 1/3 higher than other times of day.
Those businesses have helped the Grid in their activities and delivered money back into the business bottom line by reducing energy bills. Some businesses we have worked with have saved over £500k/annum through these activities. From April 2021 this will no longer be available to them – now there is no way to avoid them – they will have this price impact back. Read part 2 of our Targeted Charging Review thoughts.
How we can help you to understand the impact to your business from the changes to the TCR
Catalyst Commercial Services are working with customers now to highlight and work out the cost implications, they are likely to face moving forward and educating customers and working with them to manage capacity and minimise charges as well as energy management activities for all times of day energy reduction. By pricing a customer and giving them an indicative view of how this would impact them.
Do get in touch to find out more about the changes to the TCR and its potential cost impact to your business using our non-commodity Cost-Stacker tool.
About Catalyst Commercial Services
Catalyst is a market leading independent energy consultancy that provides energy procurement, sustainability and environmental services. Catalyst is one of the leading providers of utility purchasing and contract negotiation services to the commercial sector. With over 15 years’ experience in this dynamic market, the team of energy market professionals provide a full options appraisal for business utility contract needs.
