Targeted Charging Review (TCR)

Originally planned to be from the 1st April 2022, the method of charging for the use of the electricity Transmission and Distribution systems in the UK will fundamentally change. This is following OFGEMs review of the present charging methodology.

Very recent information from OFGEM implies that the residual fixed band charges for Transmission will now be delayed until April 2023.

All users of the systems, both domestic and non-domestic, will be affected. For some, charges will increase, and for others, they will decrease.

At the moment, the methods are:

1. Transmission

Profiles 01 and 02, which relate to domestic sites, and 03 and 04, typically small businesses, are charged on the kWhs’ consumed between half-hour periods 33 to 38 on every day of the year against standard patterns of use.

Profiles 00, relating to industrial and large commercial sites, are charged a fixed fee, £ per Kw, against the average of their own three demands. This is taken from on site HH data, which coincide with the three highest national demands recorded between periods 33 to 38 on weekdays, excluding Bank Holidays, in November, December, January and February. These three periods are known as the TRIADs’.

Many large companies were able to avoid some of this charge by receiving warnings when a TRIAD might be due and then taking action to reduce their demand by various means and therefore pay a lower share of the total cost of running the system. As a result, OFGEM felt that this created an unfair allocation of these costs, so by introducing the TCR, the opportunities for savings will be reduced from 01/04/22 onwards.

2. Distribution

All profiles are currently charged on a pence per kWh basis. Prior to 01/04/21, profiles 01 and 03 had a single rate fixed charge per kWh. Profiles 02 and 04 had a separate charge for the day and night usage, as did profiles 05 to 08. However, 05 to 08 are gradually being phased out with the conversion to 00 profiles under the P272 procedure.

Profile 00 MPANs have a separate charge for units used in what is known as Red, Amber and Green (RAG) time zones. Each of the fourteen Distribution Network Operators has its own time zones and own charges, all of which are pre-approved by OFGEM.

Typically, a Red zone will cover 16.00 to 19.00 on weekdays, Amber will cover 07.00 to 16.00 and then 19.00 to 00.00 on weekdays, and Green will cover 00.00 to 07.00 all-day Saturday and Sunday.

From 01/04/21, profiles 01, 02, 03 and 04 were changed from a fixed price basis to a RAG basis.

All the above Transmission and Distribution charges are known as locational charges. This structure will still be in place from 01/04/22, but the charges per kWh will be lower than now, as will the TRIAD £/Kw charge.

Going Forward From 01/04/22

Both Transmission and Distribution will have what is going to be known as a new Residual fixed charge. For Transmission, this will be known as non-locational, which means that MPANs in all areas will have the same charges in line with the following structure.

For Distribution, each area has their own set of charges within each band. The Band qualification will be the same for both Transmission and Distribution.

  • Profile 01 and 02 – Will have a single band
  • Profiles 03 and 04 – Will have four bands according to the Expected Annual Consumption(EAC) in kWh
  • Profile 00 – Will have four bands based on KVA

There will be separate charges in £/KVA for each band and also different charges for Low Voltage Supplies (Including Low Voltage Substation) and High Voltage sites. This Residual charge will prevent charge avoidance through load shedding. However, as it is a fixed charge, it will have the impact of increasing the average cost per kWh hour for low EAC sites and reducing the average cost for high EAC sites.

Each MPAN will be allocated its banding based on its average system EAC or KVA capacity over the twenty-four-month period prior to July 2020. Each District Network Operator has already banded all of the MPANs in its own region.

The attached spreadsheet shows, as a guide only, what the expected charges are likely to be when TCR is fully implemented but should only be used as a guide.

Our contract terms now state that we reserve the right to pass on these charges as and when they become applicable.