Targeted Charging Review
Targeted Charging Review
What is it & why the change?
The electricity network costs money to build, operate and maintain. Network operators can charge consumers each year to cover their costs. These charges are regulated and capped by Ofgem.
Electricity Transmission and distribution charges are the costs for transporting energy from the generator across the national grid to the end user (Business or Residential). These charges currently make up to 23% of the total charges that you may find on electricity invoices.
Today it is becoming more common for businesses (and homes) to generate their own electricity. As they do so, they can produce and use, store or sell back any excess power generated back to the distribution network.
Whilst there is not anything wrong with this, they are taking less power from the grid and therefore avoid paying certain charges to power providers. This means it then falls to less companies to then share the costs of paying network operators for these costs.
Ofgem has published its decision to implement changes to safeguard current and future consumers, by ensuring that costs are fairly distributed across all network users.
How the costs will be charged?
The existing charging methodology (P/kwh & £/Mwh volume-based charges) will be replaced by:
For business meters that are Non-Half Hourly (NHH) or have no agreed supply capacity, fixed daily charges will apply set against banded consumption volumes. The higher your volume the larger the fixed charge.
Half Hourly metered supplies will again see banded fixed charges set against supply capacity and voltage levels.
What does this mean for my business?
The new methodology is likely to create winners and losers, but the exact impact will not be known until tariff forecast are produced in 2021.
It is expected the difference between fixed charging bands could be significant. Therefore, it is important to explore & review your current capacity levels prior to April 2022 when the start of new charges will apply.
It is also important when negotiating any new agreement that you make sure these new costs are factored in. It is also likely that some suppliers may apply reconciliation charges, even to those on “fixed” contracts.
How Will TCR afftect the quote I am offered?
Not all suppliers will approach or forecast the new charges in the same way. Some will be adding the new charges into the standing charge and others the unit rate and all suppliers have different forecasting systems, so quotes will always vary a little. Some suppliers may not yet have even factored the changes into their pricing systems.
If suppliers have their forecasting wrong or havent included the the new charges, they might at a later date request addtional payments to meet the addtional costs. They can do this via clauses in their terms and conditions. Yes, even fully fixed contracts have clauses that alow them to pass on additional costs like these.
How can Utility Helpline help?
We will investigate supplier products and advise you accordingly. We will also make sure all costs are highlighted at renewal and which suppliers may pass on additional costs.
All energy contracts contain a variety of fixed and pass-through cost elements and many suppliers offer some level of guarantee against certain price components, although these are not precisely equivalent. Suppliers also market products as "Fully Fixed" , but this doesnt always means you are 100 % protected against potential addtional charging. Some supplier products are very unlikley to ever be openned up and addtional charges be invoiced and we can advise you accordingly.
Call today 01432 378690
Published by Utility Helpline on (modified )
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