The Targeted Charging Review (TCR) is a project led by Ofgem that aims to assess how residual network charges should be set and recovered in Great Britain. The highly technical Significant Code Review (SCR) has come up with some interesting findings which have the potential to change the way we charge for energy.

Launched by OfGem in August of 2017, the project was used in order to address concerns surrounding the current framework for residual network charges that were believed to have the potential of leading to insufficient use of the network, therefore leaving a large impact on energy customers.

OfGem shared two main objectives with their TCR, as follows;

Consider reform of residual charging arrangements for both generation and demand, to ensure it meets the interests of current and future consumers
Keep the other ‘embedded benefits’ that may distort investment or dispatch decisions under review.

These changes will occur across the board and should impact customers and businesses in a number of ways, whether positive or negative. The most notable of these would be a change to both Distribution and Transmission Network Use of System/s;

You may begin to notice that your energy bills seem to be getting more expensive. Well, there is a reason for this; Ofgem will soon start implementing changes in order to ensure that you are paying the right amount of money according to what type and voltage level your power supply falls under. For example, from April 2022 if you use low-voltage electricity at home then DUoS charges may increase by 10%.

To assess options for residual charges, OfGem did undertake a principles-driven assessment. The three principles they used to assess the potential changes are:

Reducing distortions
Fairness
Proportionality and practical considerations

OfGem used three core questions to determine how it is believed that a residual charge could be designed.

Who should pay – generation, final demand or a combination of both?
What mechanism should be used to collect charges? For example, should it be based on volumes used or other means, such as a fixed or capacity charge?
How should charges be implemented – by voltage level, user group, ability to respond to signals or a combination of these?

Under this plan DUoS (Daytime up-peak) charges would increase on a band basis depending on how much power at what voltage has been consumed during each day of peak hours – high consumption means higher costs which could also result in pro-rata reductions if usage falls below an agreed threshold over consecutive peaks periods. TNUOOS (nighttime out-of-hour supply) prices will depend solely on daily charge-bands as opposed to varying hourly tariffs with different levels applied dependent on a number of voltage-based bands by April 2022.

Transmission charges for non-domestic consumers will vary depending on the distribution area. Domestic customers can expect a single residual charge based on their own unique circumstances and needs, which is set according to each distribution area they are located in. Domestic consumers can expect to pay just one residual charge per distribution area and non-domestic customers have their rates determined by a similarly simplified process which is also dependent upon location.

The best bands for you will depend on your voltage level during the next two years. For larger customers, these boundaries can be defined by agreed capacity; while smaller consumers may need to base their limits on net consumption volume. This 24 month period will be taken from the year ending 2020, though some customers may require further segmentation.

Larger customers and businesses may be able to define their own charges independently with us if they are able to discuss an agreed capacity, though, for smaller businesses, this rate can be based on net consumption volume alone.

OfGem plans to publish the fixed charging bands at a national level with outlines specific to each Distribution Network Area. While they do this, they may change these bands through reviews and revisions in order to ensure that what is being implemented works perfectly alongside the new electricity price controls.

Transmitting Generational Residual Embedded Benefits (Triads)

Following the steps taken in April of 2022, this review will also remove Triad periods – the highest winter peak periods – in order to use this as the framework of the transmission network component (TNUoS) that makes up a large portion of companies’ energy bills. Some firms are reported to be able to save overwhelming amounts of money by switching to onsite generation during suspected tried periods, all while reducing consumption.

You can read more about the impact of triads here.

OfGem have confirmed that they feel as though eradicating triad periods is the perfect middle ground between addressing the largest distortions yet in the market and reducing the distributional impacts on customers.

Customers should expect one final triad period to take place over the winter of 2021 rolling into 2022, thereafter there will be no incentive for triad avoidance.

The Energy Intelligence Centre produced this table showing an impact on customers dependent on their area and the changes made to the DuoS and TNUoS costs, alongside how this has changed their electricity bill. At a glance, we can see that…

Southern Areas are more likely to find a larger decrease in their costs than those who live in the North. London, for example, sees a decrease of around 40% in costs, and is the only area where domestic NHH sites will see a benefit from the TCR charges.
- Sites in Scotland will not be this lucky, and are more likely see an average decrease of 7%.