Ofgem releases Targeted Charging Review

On 28 November 2018 Ofgem released its Targeted Charging Review (TCR) proposing plans to scrap the current Triad system within the next few years. One plan is to introduce fixed charges in order to create a level playing field between flexible energy users who have the ability to reduce consumption during peak times and inflexible users who currently pay a higher price as a result.

The other plan from Ofgem, is to revise the way in which Transmission Network Use of System (TNUoS) charges are paid. Currently, the costs are shared between consumers and generators, however the change will see consumers paying for 100% of these charges. This will result in an increase in the TNUoS bill for consumers, but a reduction in the cost of producing electricity for power stations. Ofgem expects this to be cost neutral for consumers as this should result in lower wholesale electricity prices.

The current system is set to be replaced either fully from April 2021 or phased in from April 2021 to April 2023. This future date will give businesses the chance to benefit from load management over the next two winters, before the proposed changes come into force.

What impact will this have on business energy users?

The effect of these proposed changes remain unclear until a detailed report is provided by Network Access Review and the final decision is made on which charging option will be selected. These users will still be able to take advantage of their flexibility to benefit from other Demand Side Response opportunities. Peak period avoidance will still be beneficial as Red Distribution Use of System (DUoS) costs are still the most expensive despite the introduction of DCP228 to flatten DUoS charges.

Embedded generators will also see their revenues reduced by the proposed removal of more embedded benefits: following changes introduced last year, Ofgem is also proposing to change the current BSUoS benefit to a charge for embedded generators.

What can I do?

With proposed changes expected April 2021 at the earliest, businesses are still in a position to take advantage of load management over the next two winters. Reducing your consumption now and leading up to the proposed change will help your business mitigate the impact.

Also with ESOS Phase 2 coming to a close next year organisations should have an updated list of recommendations and actions to reduce consumption by the end of 2019. Our optimisation team can provide a compliance service for businesses and recommend energy saving practices and measures.