- Part of all energy payments go toward keeping the energy network up and running
- Ofgem – the national energy regulator – reviews these costs to make sure customers get prices that are appropriate for their size
- They noticed some businesses had found ways to reduce the amount they were paying
- So, through the Targeted Charging Review (TCR), they brought in changes to how the industry distributes these costs
- This blog explains the results of the TCR and what it means for businesses
Explaining the TCR
We all pay towards keeping the UK’s energy network running
Both homes and businesses contribute when they pay their electricity and gas bills. These contributions come out of energy users’ unit rates and standing charges.
They’re made up of a few different costs, including:
- payments for the upkeep of the energy infrastructure
- transmission charges (the cost of transporting the energy you need from the generator to your local distributor)
- distribution charges (the cost of transporting the energy from your distributor to you)
- balancing services (the pot of money that National Grid uses to ensure it doesn’t have either too little or too much energy available to meet national demand)
Ofgem has been reviewing how much each business should pay toward this
They aim to make sure that each business pays an appropriate amount, according to how much energy it needs to operate. To do this, they sometimes change how the industry calculates each business’ contribution.
Before the TCR, this calculation factored in how much energy a business uses when national demand for energy is high (normally 4-7pm on weekdays). The less the business used in these periods, the less money they’d pay towards transmission, distribution and balancing charges.
Some large sites with flexible usage realised they could monitor national usage trends to predict when these peak demand times would happen. They’d then use this information to avoid consuming energy during these periods.
This meant they weren’t paying their share of costs. So, other businesses had to pay more to make up for it.
In response, the TCR has changed what businesses pay towards these costs
Through this review, Ofgem aims to spread costs proportionally across all customers. They hope it’ll stop some high-capacity businesses from not paying their share.
Specifically, the industry will calculate three main elements of standing charge differently from now on. Distribution charge changes came into effect in April 2022. In April 2023, changes to transmission and balancing charges followed suit.
This table summarises these changes. See below for a further explanation of each section.
Understanding what this means for you
Transmission and distribution cost amounts are changing
This new method works out a businesses’ contribution based on their size and meter setup.
😡 A metered electricity supply
A supply with a meter that measures how much electricity you use.
😡 A half-hourly electricity meter
A meter that sends your supplier meter readings every half an hour.
😡 An available supply capacity (ASC)
An agreed amount of electricity with your distributor they they make sure is available to give you at any time.
Businesses that use more energy have higher ASCs, so they can operate at full capacity without worrying about running out of power.
Sites with ASCs are split into 3 categories depending on their size: low voltage, high voltage and extra high voltage
Your new charge will depend on whether you have:
:a metered electricity supply, :a half-hourly electricity meter, and :an Available Supply Capacity (ASC)
This table shows how the new cost calculations vary for different businesses:
The way that balancing costs work is changing too
Before April 2023, the generator and the customer each paid 50% of these costs. But, generators were passing on their half to customers in the form of higher energy unit rates. So, customers ended up paying the generators’ share too.
Now, the customer will pay all of the balancing costs. This extra share will become part of their unit rates.
But, generators won’t be passing on their balancing costs to customers anymore. So, on balance, customers’ unit rates will stay roughly the same.
These changes will affect different customers in different ways
Overall, standing charges will probably increase in the short term. This is particularly true for businesses that used to monitor trends and change their usage times accordingly.
But, these short term costs should give way to long-term benefits. For example, your energy rates won’t include generators passing on their balancing services costs anymore. So, they should decrease.
Ofgem has created these bands to determine each business’ new costs. Each business fits into one, according to their meter setup and usage levels.
For businesses that don’t have ASCs
If the changes affect you, we’ll tell you your new rates
If you’re on a fixed contract, your charges will stay the same.
If you’re on a variable contract, we factored these changes into your price change on 1 April 2023.
If you’re signing up a new contract or taking out a renewal, your new rates will incorporate these changes.
How does this affect me?
If this affects, we’ll let you know your new rates
If you’re on a fixed contract, your charges will stay the same until your contract ends or renews.
If you’re on a variable contract, we factored these changes into your price change on 1 April 2023
How can I check which band I’m in?
The tables above show the criteria for each band. If you have an ASC, that will determine which band you’re in. If not, your band is based on your annual usage.
I think I’m in the wrong band, what should I do?
Are other suppliers doing this too?
The TCR is affecting the whole UK energy network, regardless of supplier.
How do I find out what my unit rates and standing charge are?