TCR decision announced: how will it affect your business?

Ofgem published their final decision on changes to residual charges following the Targeted Charging Review (TCR) on 21st November 2019 – so, what do they mean for your business?

The Outcome

Ofgem has now confirmed that they will be changing the way that residual costs are recovered by replacing the consumption-based charge with a simple, fixed charge.

The actual costs businesses will face will depend on the banding they fall into, as Ofgem has decided to allocate businesses to different bandings based on their voltage level, and these bandings will be defined by the number of supply points in each voltage level within each geographic region. Larger businesses that have a maximum import capacity agreement in place will also be segmented based on their agreed capacity, while smaller companies will be segmented by their net consumption volume. These band allocations will be based on at least 24 months’ worth of data, and once a business is given a banding, they will remain in that banding for five to eight years.

With so many variable elements determining an organisation’s segmentation, and further information on the charges for each banding still to be decided by the Distribution Network Operators (DNOs), it’s difficult to predict exactly how these changes will affect individual businesses at this stage. With the new charging system set to come into force in April 2021, and bandings due to be finalised in February 2020, we can expect to receive more details in the coming months.

How to Prepare

While residual charging changes won’t come into place until April 2021, businesses of all shapes and sizes should be taking action now to ensure they’re prepared. Here’s how you can prepare your business…

  • Check your Agreed Supply Capacity:

If you have a maximum import capacity as part of your connection agreement, check your Agreed Supply Capacity levels now to make sure that your capacity levels aren’t set higher than they need to be – if they are, you could be paying more than you need to be. Inspired Energy’s experts can carry out an Agreed Supply Capacity Review to determine whether your business is being charged correctly, which could help you to save money immediately and ensure your fixed charge isn’t higher than it should be when the TCR changes are introduced.

  • Continue with Triad avoidance:

As we still have at least two winters ahead of us before the changes come into force, if you’re able to be flexible in your consumption then you should continue to do so. Shifting or reducing your consumption during peak periods should help you to keep your charges to a minimum while they remain consumption-based.

  • Understand the impact fixed charged will have on your business:

When the bandings are finalised in February 2020, it is important for businesses to fully understand the impact fixed charges will have.  Inspired Energy’s analysts can provide a budget review and recommend actions to mitigate it.

  • Focus on energy efficiency:

Once the fixed charges come into force, reducing your overall consumption will be the only way to truly mitigate their impact on your energy bills. Now that the ESOS Phase 2 deadline has passed, you should have identified a number of energy efficiency recommendations that you can carry out to ensure that you’re not wasting energy unnecessarily.

Don’t be daunted by the upcoming changes from the TCR – Inspired Energy’s optimisation experts have the expertise required to mitigate their effect on your business. Whether you’re looking for support with understanding what the changes mean for your business or taking action to prepare your business now, give us a call on 01772 680250 or email optimisation.hub@inspiredenergy.co.uk.