WME's guide to the
Targeted Charging Review (TCR)

WME’s Guide to the Targeted Charging Review (TCR)

Ofgem’s Targeted Charging Review is changing the way consumers are charged for electricity network costs, specifically, Distribution Use of System (DUoS) and Transmission Use of System (TUoS) charges.

This quick guide will help you to better understand TCR.

What is the Targeted Charging Review?

Electricity regulator Ofgem has been looking for many years at some of the non-commodity costs paid by non-domestic consumers to help maintain the UK’s electricity network. It wants the system to be made fairer, particularly between those who can generate their own power and those who cannot, and those who can easily shift consumption patterns, and those who cannot.

The TCR was carried out to look at how electricity network residual charges should be set and recovered, for both TUoS and DUoS in the UK.

According to Ofgem, the results bring more parity to the system, making charges fairer, so that consumers with similar energy needs, will pay similar amounts. They claim that the new approach to charging will result in multi-billion-pound consumer savings by 2040.

What is changing?

The biggest change implemented as a result of the TCR is the way suppliers are charged for Transmission and Distribution charges.

These costs are split into two parts. The first is a residual charge which goes towards the cost of maintaining the electricity network. The second, a forward-looking charge, is the cost related to expanding and growing the network.

The changes introduced by the TCR only affect the residual charge: which is approximately 90% of the cost of TUoS and 50% of DUoS.

Ofgem’s new system allocates consumer sites into different bands based on their supply capacity or consumption.

This has been calculated using data from a historic 24- month period to the end of 2020.

What does this mean to me as a consumer?

Consumers with non-half hourly supplies will be charged a fixed fee based on banding linked to annual consumption levels. Half-hourly supplies with whole current metering, are also banded based on consumption.

For the rest of the half-hourly supplies, charges will be determined based on the agreed supply capacity (kVa) and voltage level.

For DUoS, this means reallocating some of the cost from the unit rate to the standing charge. (This reallocation is standard across the industry, not supply specific) The existing Red, Amber and Green (RAG) time of day charges will still exist for the proportion that remains in the unit rate.

For TUOS this means the unit rate and the Triad element will be reduced and a new standing charge component will be created.

Essentially, a lot more of the DUoS and TUoS charge will be levied via the daily standing charge.

When is it happening?

The changes to DUoS charges come into effect from April 2022, but the TUoS changes won’t be implemented until April 2023. Therefore, you will not see the full impact of TCR, until WME communicates prices for 2023/24

Will WME ensure I am charged correctly?

WME’s fully managed customers receive a full bill validation and payment management service.

Ahead of accepting and communicating prices at the beginning of each financial year, WME’s billing team validate a number of criteria to ensure that the prices being agreed are accurate.

This includes both procured commodity costs, and non-commodity, including TUoS and DUoS. Therefore, customers can be assured that they will be charged correctly in line with the new mechanism.

We will not accept supplier prices until we are 100% happy with all elements making up the final rates, thus providing thorough assurance that prices are correct before monthly invoices are issued.

For 21/22 pricing, WME identified £120,000 worth of pricing errors across our portfolio, all of which were resolved by WME, protecting customers from significant overcharging.

If you have any further questions on TCR, please contact WME at: customerservices@westmerciaenergy.co.uk

Glossary:

DUoS: DUoS is an abbreviation for Distribution Use of System. This is a non-commodity charge that is added to all business electricity bills to cover the costs of the electricity distribution network.

TUoS: TUoS is an abbreviation for Transmission Use of System. This is also a non-commodity charge that forms part of the business electricity bills and covers the electricity transmission network, also referred to as the National Grid. The charge applies to generators as well as business end users.

Triad: Triads are the top three half-hour peaks of energy demand across the National Grid, each separated by at least 10 consecutive days, over the most energy intensive period of the year: November to February. Typically, Triads occur when high business demand meets the domestic tea-time period, causing an overall spike in energy use