Reducing the risk of the Targeted Charging Review in 2023

Steve Fearns - Risk Modelling and Cost Manager
| 16th March 2023 | Energy Renewables

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 has established a new system by which network owners charge energy customers for the use of the electricity networks in the UK.

With changes to TNUoS (Transmission Network Use of System) charges coming from April 2023, we take a look what this could mean for your business. Here are the main things you need to know…

WHAT’S HAPPENING AND WHY?

The TCR is an Ofgem-led project that assesses 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 now 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.

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 tariffs have always had a fixed daily charge component. But as part of TCR, Ofgem has directed that the way DNOs (Distribution Network Officers) set this charge should also change – moving some of the cost recovery that currently comes 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, following some delays, changes to the TNUoS charges will come into effect from April 2023.

HOW BUSINESSES WILL BE AFFECTED 

For larger businesses able to reduce or shift energy volumes, winter Triad periods have historically provided an opportunity to make savings through flexibility by reducing consumption during peak periods. Even those who aren’t able to be flexible in their usage can mitigate the impact of Triads by increasing their energy efficiency. Under the new system, Triad avoidance will no longer be possible for many and, where it remains, the benefits will be significantly reduced. This means that businesses who used this method to reduce their TNUoS costs might find their annual energy bills could be significantly increased. For businesses previously able to boost generation revenue by exporting energy to the grid at peak times, the reduction of Triads could affect their bottom line and reduce the benefits of having on-site generation. While businesses who participate in grid-balancing Demand Side Response schemes will still be able to benefit from doing so, they will lose out on the additional revenue available during Triad periods.

Another consideration for some businesses whose contracts begun in the winter is that the new daily TNUoS charges, coming into effect from April 2023, will overlap with the Winter 2022 Triad recovery costs, which are typically spread across bills over 12 months. Businesses should therefore work these costs into their budgets now.

For some, the TCR will mean a bigger energy bill and a need to rebalance the budget in other ways. But large energy users who have previously been unable to consume energy flexibly and have therefore been hit with excessive Triad costs could actually see a reduction in non-commodity costs – and it’s these businesses that must think most carefully before they choose their next contract.

TOTAL TRANSPARENCY FOR OUR CUSTOMERS

National Grid ESO has now published the TNUoS charges that will be fixed from April 2023 for 12 months. To view the daily charges by band, 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. For some contracts signed before September 2020, we have recalculated the TNUoS costs in line with the latest published tariffs, and this will be reflected on those customers’ bills during May. For our customers on a Pure Control or Pure Flex contract, you will see a new daily cost line on the TNUoS charges section of your bill, also from May.

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.

Make the most of your flexible solutions

If you’re currently using technology or solutions to avoid Triad periods and expensive time of use charges, the benefits might be reduced slightly with fixed-rate charge, but they won’t disappear. Now is the time to consider how you use these solutions to optimise your usage more continuously and boost your revenue in other ways. For example, organisations opting for our optimisation solutions are able to offset 20% of their energy spend by allowing us to subtly tweak their consumption (within agreed limits) in line with system needs, without impacting their operations. You can learn more about the benefits of optimisation in our blog, 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.

Back to the knowledge hub
Categories
All
Energy
Renewables
Optimisation
Bryt Insight
Sustainability
Relevant NEWS
Bryt Insight May 2024
Bryt Insight May 2024
Read
Bryt Insight April 2024
Bryt Insight April 2024
Read
Smart Meters Myth Busting Q&A with Yasir Choudhry, Metering and Settlements Manager
Smart Meters Myth Busting Q&A with Yasir Choudhry, Metering and Settlements Manager
Read