The UK energy industry and how it charges for electricity is undergoing huge changes.
The Targeted Charging Review (TCR), an OFGEM-led project, is assessing how electricity network charges should be set and recovered in the UK.
What are the component costs of a bill?
Electricity bills are made up of a combination of commodity and non-commodity charges which are influenced by volatile market conditions and different organisations within the supply chain. The non-commodity costs make up over 60% of your bill, including charges to operate and maintain the network infrastructure - Distribution Use of System (DUoS) and Transmission Network Use of System (TNUoS).
Until now, users could reduce their contribution to both these costs by using their own generators to avoid using power at peak times. Whilst this was great for those larger businesses, others without means to move their energy still had to pay the charge.
Under the TCR changes the DUoS and TNUoS will be charging a fixed daily and standing charges based on a new voltage-based banding system which is being introduced. This will replace the existing Triad charges added during winter months (November to February) for those with half-hourly meters from April 2022.
So whilst everyone will see reductions in their DUoS unit rate, this will be offset by higher fixed charges recovered as part of the monthly standing charge. This has been designed to provide a fairer and more practical way of collecting the system revenue which will affect some businesses more than others depending on their consumption patterns.
Although this reform was already in progress, it has been accelerated to support the DUoS who have lost money through lockdown because of lower than forecast energy use.
New distribution bindings
When will things change?
DUoS changes are due to come into effect from April 2022 whilst Ofgem has recently announced that TNUoS changes are likely to be launched in April 2023.
Mitigating the impact and costs for clients is another part of the procurement service our team actively provides.
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