What is the Targeted Charging Review (TCR)?
Ofgem’s TCR is changing the way energy suppliers are charged for transmission and distribution charges. Their aim is to improve customer outcomes by spreading costs more fairly between businesses and consumers. Currently, charges are mostly built into your unit rates. However, from April 2022, Shell Energy and other suppliers will start to be charged differently by the network operators.
1 April 2021 OFGEM update
Ofgem published a letter on the 1 April 2021 indicating that they are ‘minded-to’ delay the start of TCR transmission (TNUoS) charges by one year. If this is approved, it would mean that TCR TNUoS changes would be effective from April 2023 rather than April 2022. The OFGEM letter can be found here.
OFGEM’s ‘minded-to’ position does not impact TCR distribution (DUoS) charges. They will continue to change as of April 2022.
How will TCR impact business customers?
Traditionally, transmission and distribution charges have been passed on to you as a unit charge.
As a result of TCR, the majority of your transmission costs, and roughly half of your distribution costs, will be a fixed charge. For Shell Energy’s business customers, both elements will now be included within your standing charge. We feel this is the fairest approach to charging our customers.
By moving these costs to the standing charge, like many other suppliers, the noticeable impact for the majority of customers will be a higher standing charge and a lower unit rate.
How will the TCR bandings work?
You will be assigned to a certain banding based on your site's size. This banding will then determine the relevant TCR charge passed on to you from us.
For the majority of half-hourly (HH) meters, bandings will be based on the agreed capacity of the meter. For business non-half hourly (NHH) and HH meters without a capacity charge, the bands are determined by volume.
How will the targeted charging review (TCR) affect Triad charges?
The planned changes to transportation charges from Ofgem will result in fixed charges for customers. This means an end to the previous Triad-based approach. When fully implemented, customers who can reduce energy usage during peak times will now see little or no benefit in their Transmission Network Use of System (TNUoS) costs. The aim is to make it fairer for those customers unable to consume less during peak times.
This will negatively impact business energy users who have traditionally been able to forecast Triads and implement load shifting or load shedding strategies to reduce their transmission charges.
Are all suppliers dealing with TCR in the same way?
Other energy suppliers may choose to pass on TCR costs differently. Depending on their stance, this could mean additional charges for you at a later date.
If you have any supply contracts with another energy supplier we would recommend that you approach them to better understand their position.
How can I compare supplier quotes accurately if they are taking different approaches to TCR?
Our advice would be to ask suppliers directly how they are accounting for TCR in their quotes and tenders. Plus you should take the time to familiarise yourself with their terms and conditions for clarity.
If you receive a quote and the standing charge looks particularly competitive, you may want to check that the supplier has included the TCR charge in their pricing.
How will the TCR affect the quotes you receive from us?
The aim of TCR is for everyone to pay their fair share to use the network at peak times. Although costs are changing, the impact will not necessarily result in a price rise for all customers.
At Shell Energy, we believe in simplicity and affordability. That’s why we want to offer a clear solution to TCR that’s fair and easy to understand. We have committed to incorporating accurate TCR charges within all of our quotes. This provides you with peace of mind, price certainty and no nasty surprises further down the line.
Based on OFGEM’s 1 April 2021 announcement we have updated our prices. Our fully-inclusive products are entirely reflective of OFGEM’s ‘minded to position’ that proposed TCR transmission (TNUoS) charges will likely change in April 2023 and not April 2022. In practical terms, this means TNUoS charges for the period April 2022 to March 2023 have reverted back to the pre TCR methodology.
Why not contact us today to secure a renewal quote that fully protects you from future TCR charges.
How TCR will impact different renewal quotes.
The examples below relate to the proposed TNUoS TCR update. They reflect OFGEM’s ‘minded-to’ position, as of 1 April 2021, that changes will be effective from April 2023 and not April 2022.
April 2022 renewal - 12 month contract
A customer who locks in a contract for 12 months for a April 2022 renewal will see no difference in the way their price is calculated.
October 2022 renewal - 12 month contract
A customer who locks in a contract for 12 months for a October 2022 renewal will see a change in the way their costs are calculated. As this will be a period of transition, the customer will see both the Triad charges they are used to between November and February as well as the new TCR charge from April 2022 onwards.
April 2023 renewal - 12 month contract
A customer who locks in a contract for 12 months for a April 2023 renewal will also see a change in the way their costs are calculated. The customer will see both the Triad charges they are used to, albeit at a lower rate, and the new TCR charge as it first comes into play.
Where is the TCR cost included within my invoice?
TCR is applied cost reflectively. Where we are charged as a unit rate, we will pass that cost to you as a unit rate element, where we are charged a p/day or £/year cost, we will charge you as a standing charge, p/day.
Fixed all-inclusive contract
Customers with a fixed all-inclusive energy supply contract will have their TCR costs included with their standing charge.
For pass-through contracts, customers’ invoices will be transparent. Relevant costs are separated out and passed on as soon as they become chargeable.