It seems lately that I am always writing about bad news…
…there are changes afoot in the Electric Industry which will change the way consumers pay for their use of the electricity network infrastructure known as ‘Targeted Charging Review (TCR)’ and ‘CMP308’ which will have an impact on the following elements of electricity billing; Transmission Network Use of System (TNUoS), Distribution Use of System (DUoS) & Balancing Use of Service (BSUoS) charges.
Ofgem have been looking into TNUos & DUoS charging and have concluded that the current methodology favours those customers who can shift their demand to reduce their contribution to network charges. In layman’s terms imagine the 24 hours in a day are split into a traffic light system of demand; RED – peak usage (7-9am & 4-6pm), AMBER – average usage (10am – 4pm & 7pm – 12am) and GREEN – low usage (12am – 7am). If a company can move peak production or shift patterns away from the RED periods, a lower average price per kWh can be achieved when agreeing contracts, but this means the shortfall to the networks must be made up by other network users which Ofgem view as unfair. Ofgem is making changes to BSUos charges to better align the UK’s market arrangements with those widespread within other EU member states with the aim to provide more effective competition and trade across the EU to deliver lower costs and benefits to all end consumers.
What is going to change – nothing until the 1st of April 2022 for the TNUos & DUoS changes and the 1st April 2023 for the changes to BSUoS. The changes coming on the 1st of April 2022 will see the introduction of a fixed per day residual charge being applied to ALL businesses and households and new charging bands for both TNUos & Duos. The fixed per day charges that consumers will need to pay will be determined by either; their agreed capacity for Half Hourly (HH) settled used (large industrial supplies – commercial laundries, care homes and hotels etc!) or your net annual consumption for non-half hourly settled users (all other meters/consumers). This again in layman’s terms means a marginal decrease in the cost per kWh of energy but a significant increase in daily standing charges. Taking the past year into consideration, this would have meant that all businesses closed during lockdown would still have had to pay increased daily charges for simply having a meter at their business premise whether used or not!
What does this mean for business – well if you want certainty over these costs for the coming years, contracts will need to have these changes agreed upfront on fully fixed contracts, whereas if your business is on a flex contract, these costs will be passed through as they increase on your bills each month making costing very difficult to forecast and this will likely lead to many businesses switching back to fully fixed contracts upon renewal…. However, to date, all suppliers have stated that they will honour the rates agreed on any current fully fixed contracts that pass the change date of the 1st April 2022 with the changes being applied on renewal contracts moving forwards.
For help and advice on TCR & CMP308 or to find out how Fox Energy can assist your business, get in touch by calling 01233 884510 or email [email protected].