26 May 2023
From the 1st April 2023, the second phase of Ofgem’s Targeted Charging Review (TCR) will come into effect. This follows the initial rollout of new measures which began last year and changed the way Network Operators recover their costs from suppliers.
In this article we outline what happened in 2022, what’s changing in 2023, and how your business might be affected.
Your electricity bill is primarily made up of two elements:
Commodity charges – these reflect the cost of purchasing energy from the wholesale market.
Non-Commodity charges – these are made up of renewable levies that encourage renewable generation, and network-related charges to pay for operating and maintaining the distribution (DUoS) and transmission (TNUoS) networks. It is the latter charges that TCR directly impacts.
You can find out more about DUoS and TNUoS charges click here.
The story so far
The changes introduced by Ofgem are designed to make sure network operators recover the revenue they need to maintain the transmission and distribution systems, while reinstating fairness for all consumers. They include new fixed p/day charging bands for business electricity customers for Non-Half Hourly (NHH) and Half Hourly (HH) meters.
If your business was on a flexible energy contract at the time of rollout, you would have seen these changes from your April ‘22 invoices onwards. However, if your business was on a fixed contract last year or still is on a fixed contract, then you’ll see these changes reflected in your renewal price.
For a full recap of what happened last year, read Ofgem's Targeted Charging Review explained.
What's changing in 2023?
To lessen the immediate impact of these changes on customer bills, Ofgem staggered the changes – with the distribution (DUoS) element introduced in April last year and the transmission (TNUoS) element taking place a year later.
It means in April 2023 we saw residual TNUoS costs – which make up the vast majority of TNUoS costs – finally move away from consumption-based charges and into Standing Charges. The changes use the same bands brought in last year with one main difference; the TNUoS charges don’t differ by region.
The graph below shows how much the consumption-based TNUoS charges have fallen away in 2023 across all of the networks.
As with last year’s changes, it’s likely you’ll have seen the impact shown in the graphs above on your bill if you’re on a flexible contract. Any businesses on a fixed price contract can expect to wait until their renewal. However, no matter what contract you’re currently on, now that both charges have come into effect, it’s a good time to review your energy contract and make sure it’s the right one for your business. Check that you’re not paying too much for your energy and that your contract still suits your business needs. You may find the time is right for fixed price stability or to find out more about one of our renewable energy supply options.
Tackling rising costs
Having the right energy contract is just one way you can take control of your energy costs. So although the standing charges on your energy bill are likely to increase with the new TCR measures, the majority of your energy costs still reside in your consumption-based unit rates, which you can influence if you have the right energy product and/or on-site technology.
As always, the first step is to sign up to an online account if you haven't already. There you can view your balance, check past bills, and submit your meter readings so you only pay for what you use. Fully informed, you are then in a stronger position to take control of your consumption and start lowering your bills.
An audit of your premises can quickly reveal energy-saving opportunities – from quick wins that you can implement right away to more significant changes that might cost more now but save money in the longer term. The important thing to remember is that every type of business can cut its energy bills. Browse how to save by sector to search for energy-saving tips that might be suitable for yours.
We’re here to help
If you have any questions about the TCR or need advice on making sure you have the right energy strategy or energy plan in place for your business, we can help. If you're already with us speak to your customer manager, if not learn more about how we can help your business today.
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