Ofgem's Targeted Charging Review and the impact on energy suppliers
Jan 6, 2020
Head of Pre-Sales
Jolyon Canlin, Regulations Manager at ENSEK, summarises Ofgem's Targeted Charging Review and breaks down next steps
TCR Summary - What is it?
Ofgem has published its final decision and impact assessment on the Targeted Charging Review on the recovery of network costs.
This will have an impact on suppliers and the network charges that they will pass on to their customers.
What are the key takeaways to make note of?
From April 2021 TNUoS charging will move from triad demand to fixed charge basis for HH consumers.From April 2022 DSUoS charging will change, placing more emphasis on a fixed charge based on available capacity with a small amount of time-of-use remaining.Charges will be banded on four levels based on site capacity and voltage of connection.
The TCR intends to ensure that large consumers are prevented from reducing their charges through triad avoidance (as is the case currently).
How does it impact network costs?
The methodology for applying network charges will change. The current method looks at triad charging, which focuses on the three highest winter peak periods of demand.
Some businesses can manipulate the charges applicable to them by reducing consumption and/or switching to on-site generation during periods they suspect may be triad periods.
For high consumption users this can save large amounts of money on their bills.
How does this impact energy suppliers?
The decision is unlikely to have a noticeable impact on domestic customers or smaller consumers who will not have changed their consumption behaviour.
There is a possibility that there could be savings for these customers as the charges are re-distributed against those who have not been impacted previously.
B2B customers and larger I&C suppliers will notice a difference and, in some cases, it may be quite a significant impact.
There may be some impacts for Demand Aggregators as consumers may change their habits, once built around triad avoidance, by reducing consumption.
There may be other impacts where a business may decide that it no longer needs to reduce its consumption during high consumption periods as there will be no cost saving.