What is the Targeted Charging Review (TCR) and how will it affect you?

Business owners up and down the country may have heard of Ofgem’s Targeted Charging Review (TCR). The new rules came into effect from April 2022, establishing a new system for non-commodity charges. This is effectively how network owners charge energy customers, for the use of electricity networks in the UK.

These changes will impact every business differently. So, it is essential that every business understands the effects the new rules will have on their bills, before they enter into their next electricity contract.

Here are some important points you should know about TCR and how it will affect you.

What is the TCR?

The TCR is an Ofgem-led project that assesses how network charges are set and recovered. It was launched to address concerns 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. It is hoped that the TCR changes will help consumers avoid detrimental effects, and distribute the costs more fairly – particularly for those that consume energy during peak periods.

For customers that are metered half hourly, electricity transmission costs run according to Triads. Triads are the three half-hour settlement periods in the winter with highest system demand. National Grid determines these peaks to set electricity charges, and they are calculated retrospectively in March of each year.

Now Ofgem has introduced new rules, following concerns that the current system distorts the market and is detrimental to businesses of all sizes. It also comes amid concerns that more savvy businesses may try to avoid Triad periods, and not pay their share towards maintaining the grid year-round.

How will this affect you?

Triad periods usually provide larger businesses with 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. However, under the new system there is less incentive for Triad avoidance and, where it remains, the benefits will be significantly reduced.

TCR changes introduced in April 2022 now mean that non-commodity charges will no longer be based upon peak-time consumption and will instead be based on a standard flat rate. All meters will be sorted into bandings and charges applied to each banding. These bandings will be reviewed every five years.

For some, the TCR will increase their energy costs, as they may fall within a higher banding, but this can be rebalanced within other areas of their budget. But those larger energy users who have not previously consumed energy flexibly and who have been hit with high Triad costs could see significant improvements, and reductions in non-commodity costs.

Where does EIC come in?

Keeping track of your energy usage is important at the best of times, but even more so under current circumstances. With these latest changes to electricity charges, keeping track of your energy costs can seem all the more confusing.

Reducing your energy consumption is a simple and effective solution to reducing costs – if you know how. Finding simple ways around constantly rising prices can often be confusing and time-consuming. But it doesn’t have to be.

At EIC, our goal is to help companies navigate the best routes for themselves and their business plan. We recognise that while there is a broad range of reasons as to why energy prices are rising, we can help our clients return their business strategies to normal.

Get in touch today to find out more. Also, keep your eyes peeled for our upcoming blog about how access to data could help your journey towards energy efficiency.