TCR 101: A guide to the Targeted Charging Review
- Posted by cu_admin
- On 8 September 2021
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The review, which began back in 2017, will soon have a significant impact on today’s businesses
Ofgem’s Targeted Charging Review (TCR) has a direct impact on the way businesses are charged for their energy. Understanding the review is paramount to making the most of your business energy, helping you protect profitability and prevent electricity costs from eating into your organisation’s earnings.
UK suppliers are having to change the way they charge for energy consumption because of the TCR. So, we’re here to help you and your organisation get familiar with what the Targeted Charging Review is and how your business should accommodate it.
What is the TCR?
The Targeted Charging Review, or TCR, was first launched by Ofgem back in August 2017. It was proposed in order to address Ofgem’s concerns that the existing framework for residual and cost-recovery charging was inefficient. Experts worried that poor use of networks could result in unfair outcomes for energy customers.
As such, the TCR looks at how electricity network residual charges should be set – both for transmission and distribution. It also explores the differences in charging arrangements between larger transmission-connected generators and smaller distribution-connected generators. These are known as Embedded Benefits.
In short, the TCR is designed to promote fairness in business electricity costs, reduce distortions, and address practical considerations.
What does this mean for businesses?
The big change to come out of the TCR is the way suppliers are charged for transmission and distribution costs. These fees are split into two categories: residual (the cost of maintaining the electricity network) and forward-looking (the cost of expanding the network).
The change only impacts the residual charge but, as this accounts for 90% of transmission and 50% of distribution, the effects are significant. The residual charge is currently built into business customers’ unit rates. However, from April 2022 network operators will be charging suppliers a fixed fee for every business customer’s site.
This means that similar sites will ultimately pay the same towards the maintenance of the network.
How will your business energy quote be impacted?
Customers will be placed in one of several bands, depending on their size. This band will establish how much they will be expected to pay for transmission and distribution costs.
As a result, many suppliers will add this fixed fee into their renewal offers, meaning the overall energy quote will likely look different from next spring. The standing charges may well increase. Other suppliers, however, may add the cost into the unit rate rather than the standing charge.
Businesses will have time to get used to this new system, though. Between April 2022 and April 2023, there will be a transition charge for transmission for half-hourly sites. Charges will be split into residual and forward-looking sections, to make sure everyone is paying the right amount.
Get in touch today to make the most of your business energy
Any change to business energy costs should be met with an open mind, as understanding the new expectations can help you meet requirements without ending up paying too much for your electricity and gas. Having expert advice on hand when trying to find the best business energy quote for your organisation is absolutely paramount. That’s why Consultiv Utilities is here to help.
We understand how important it is to secure the best business gas and business electricity deals to ensure a cost-effective and reliable supply to your premises. By reviewing the agreed supply capacity and power factor of your site, we can ensure that any opportunity for cost mitigation is maximised. Get in touch with the team at Consultiv Utilities today to start prioritising fair energy costs
Get in touch with the team at Consultiv Utilities today to start prioritising fair energy costs.