Targeted Charging Review Explained

What is the Targeted Charging Review (TCR)?

The Targeted Charging Review (TCR) is being implemented from 1^st April 2022, the changes will modify the way maintenance and improvements to the Local and National Grid Distribution Systems are paid for.

All business energy supplies will be grouped into fixed price bands based on the type of metering, voltage, and capacity. Until the implementation of TCR the cost of maintaining the grid is levied on an organisation’s consumption and time of use, with costs greatest when demand is also at its highest, split between local and national distribution operators:

• Distribution Use of System (DUoS) charges – these charges are levied depending on the time of day and volume of energy consumed by an organisation, by the local Distribution Network Operator (DNO). Levies vary by DNO and are broken down into times zones of Green, Amber and Red.
  • Green – this is generally applied to electricity use between 22:00 – 07:00hrs Monday to Friday and all weekend, although there are regional variations to these times.
  • Amber – this is slightly more expensive than the ‘Green Bands’, and generally is applied to electricity consumption between 07:00 – 16:00hrs and 19:30 – 22:00hrs Monday to Friday, again regional variations exist, and some regions may incur ‘Amber’ charges at weekends.
  • Red – these are much more expensive than the other two bands, these higher tariffs are usually applied between 16:00 – 19:30hrs weekdays, regional variations may also apply.
• Transmission Network Use of System (TNUoS) – these are levied by National Grid for the continued maintenance, improvements, and new infrastructure, which form the Transmission System in England, Wales, Scotland and Offshore. These charges are levied based on an organisation’s consumption during peak demands, known as ‘Triad’ and operate between 1^st November and 28-29^th February, when demand is traditionally at its highest.

Why is TCR been implemented?

The changes are being introduced to level out the cost of maintaining the distribution systems across energy users, it is seen as a much fairer way to pay, rather than the time sensitive bands outlined above. This is largely due to a recent trend in ‘load shifting’, where large energy users can store energy in batteries during the Green and Amber time bands, for use in the Red time bands, reducing loads or switching on local generation, avoiding the more expensive Red levies and Triad charges.

These changes to companies load profiles, has meant a reduction in revenue to pay for the upkeep of the distribution systems. Organisations have previously been incentivised to reduce or shift loads during peak demands, through incentive schemes such as Demand Side Response and penalties in the form of Triad Charges. The incentive schemes have added considerably to energy charges over recent years, with the implementation of Change-for-Difference (CfD), Capacity Market Reform (CM Levy) and other such schemes, all paid for by commercial electricity users.

Why does my organisation need to be aware of TCR?

The changes which come into effect as of 1^st April 2022 will affect your future energy cost, the bands have already been decided based on your historic energy use, meter type (Half-Hourly or Non-Half-Hourly), voltage (High or Low Voltage) and available capacity. Where you have an existing electricity contract which goes beyond the implementation date, suppliers reserve the right to pass on the additional charges.

Where a new contract starts before the implementation date, not all suppliers will have included the additional cost in their quotations or contracts, whilst others may have. So, it is important electricity users are aware of these charges which can be significant, running into tens of thousands of pounds for the largest energy users. When renewing your energy contracts, you must confirm whether the proposed contracts include or exclude TCR, as failure to account for this charge could result in a contract which appears cheaper, costing considerably more.

How has TCR banding been calculated?

The banding has been set according to your metering type, voltage, and available capacity (Half-Hourly supplies >100 amps / >70 kVA). Traditionally the available capacity was set by the District network Operator (DNO) and may not have been reviewed, so you may have more capacity than you need.

As the bands have already been set based on the previous two-years, there is little you can do to reduce the band during the next five-years. However, if your capacity is more than required and can be reduced to a lower band, then you should look to do this (we can help), as it will start to reduce your immediate costs.

What if our organisation believe they have been placed in the wrong banding?

Where you believe the capacity could be reduced by 50% or more, then you can apply to reduce your capacity and raise a case for review (the dispute process has not yet been finalised, so more details are expected), if successful you could be placed into a lower band and charged accordingly.

What will the cost impact be to my organisation?

The final costs are not yet decided; however, suppliers are able to forecast costs based on information available, with proposed charges to be released 31^st January 2021 and confirmed in the autumn. As some suppliers are making informed estimates, we can assist with assessing the impact to your electricity supplies, so please contact us to undertake a review.

How can Powerful Allies help?

Reducing electricity consumption through energy efficiency is the most cost-effective way to protect your organisation from increased costs. This is also good for the environment too, as it reduces Greenhouse Gas emissions from power stations and the need to build more electricity producing plant. As such organisations are faced with an increased emphasis on Greenhouse Gas Reporting and compliance, we can assist you with all aspects of:

• Energy efficiency, reductions and sufficiency
• Legal Compliance
  • The Streamlined Energy and Carbon Reporting (SECR)
  • The Energy Savings Opportunity Scheme (ESOS)
  • Display Energy Certificates (DEC)
  • Energy Performance Certificates (EPC)
  • ISO 50001 Energy Management Systems
  • ISO 14001 Environmental Management Systems
• Energy Data and Carbon Management
• LED Lighting
• Available Capacity reviews and dispute process for TCR
• Fully inclusive Electricity Comparisons and Contracts

What else should my organisation be aware of?

Demand Side Reduction (DSR) and Standby Operating Reserve (STOR) incentives may be phased out, following the implementation of TCR and make flexible pass-through contracts redundant as there will not be any way of avoiding ‘Red Band’ costs for large energy users.

Triad charges will change to a fixed cost and be levied proportionately against all non-domestic energy users, organisation which previously avoided these charges will be captured by the new TCR charges.

Non-Half-Hourly metered supplies with no available capacity charges, charging bands will be based on net volumes of consumption affecting the Standing Charges. Half-Hourly metering charges will vary depending on available capacity and voltage connection, with rates varying between different regions of the UK.