Ofgem’s Targeted Charging Review (TCR) has a direct impact on the way your business is charged for energy. Understanding this 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.
Understanding TCR
To grasp the implications of TCR, it’s essential to familiarise yourself with the key components of your business energy bill:
- Commodity charges – the cost of purchasing energy from the wholesale market.
- Non-Commodity charges – charges made up of renewable levies that encourage sustainability, and network-related charges to pay for operating and maintaining the distribution (DUoS) and transmission (TNUoS) networks. TCR directly impacts DUoS and TNUoS.
The history of TCR
The Targeted Charging Review was first discussed by Ofgem back in August 2017. It was proposed to address Ofgem’s concerns of potentially unfair costs passed onto suppliers and customers for running and maintaining electricity networks.
The result is a major change to the way businesses are charged for transmission and distribution costs.
In short, the TCR was designed to promote fairness in business electricity costs.
How does TCR impact your business?
The implementation of Ofgem’s TCR has brought about notable changes in how businesses are quoted for their energy consumption. Changes only impacts the residual charge but, as this accounts for 90% of transmission and 50% of distribution, the effects are significant.
Are all energy suppliers dealing with TCR in the same way?
Each supplier may choose to pass on TCR costs differently. Depending on how they do this, this could mean additional charges for you at different times.
Our advice would be to ask your energy supplier how they are accounting for TCR in quotes and tenders – or seek advice from your energy broker if you need more clarity. You should also take the time to familiarise yourself with your suppliers’ terms and conditions for extra clarity.
How will TCR affect your business energy quote?
The implementation of Ofgem’s Targeted Charging Review (TCR) has brought about notable changes in how businesses are quoted for their energy consumption. Customers are now categorised into fixed charging bands based on their size, determining the expected costs for transmission and distribution. This adjustment has prompted many suppliers to integrate a fixed fee into their renewal offers, resulting in a discernible difference in overall energy quotes.
To mitigate the impact on bills, Ofgem introduced a phased approach to the charges. The distribution (DUoS) element was introduced in April 2022, followed by the transmission (TNUoS) element in April 2023.
The review also removed the Transmission Generation Residual embedded benefit (Triads) as of April 2022. Ofgem believes that removing Triads is an appropriate compromise between addressing the largest distortions in the market and reducing the distributional impacts on consumers.
Plus, Ofgem advises that non-domestic customers pay more for their electricity. Particularly those that currently avoid charging due to load shifting or on-site generation. it also advises that those who may see cost increases in the short-term will ultimately benefit from longer-term savings, compared to current charging methodology.
Make the most of your business energy
Having expert guidance readily available is essential when seeking the optimal business energy quote for your organisation.
At Consultiv Utilities, we understand how important it is to secure the business gas and business electricity deals to ensure a cost-effective and reliable supply to your premises. Get in touch with the team at Consultiv Utilities today to start prioritising fair energy costs.