A breakdown of the Targeted Charging Review (TCR)

Written by Valda Energy

Energy

21/06/2024

Blog
In late 2019, Ofgem introduced an initiative to update the electricity network charging methodology and improve the way residual costs for maintaining the networks, which move energy across the country and locally, are distributed fairly among businesses. This was known as the Targeted Charging Review (TCR). 

The background behind the TCR 

It was discovered that some businesses were manipulating their energy use at specific times to reduce electricity costs and energy distribution charges. This is also known as load shifting.  

With more businesses' load shifting this impacted the electricity prices and meant the businesses who weren’t had to make up the shortfall in charges. To stop this, Ofgem – the national energy regulator- reviewed how much each business should pay toward this depending on their size back in November 2019. This brought along the Targeted Charging Review (TCR) that now affects the whole GB energy network.  

The change was implemented in two stages. Distribution charges (for getting energy to your homes and businesses) were effective from 01 April 2022 and transmission charges (for transporting energy across the country) were effective from 01 April 2023.  

What does it mean for businesses now?  

Before the TCR, the residual charges were recovered through the unit rate, which was unintentionally impacting the electricity prices’ changes to be more extreme. This then became more costly for businesses that weren’t or couldn’t load shift.  

As of April 2022, the charges have now become more fixed for the majority of customers in £ per day and collected through your standing charge. Meaning, a fair charge more specific to your business.  

How does this impact me?  

Each business is assigned a charging band based on their Kilo-Volt-Amperes (kVA), or their annual consumption as of August 2020, to determine how much they will be charged daily. These bands are sometimes called TCR bands or Residual Charging Bands and are allocated to you by your distribution network operator 

These changes have impacted the businesses that manipulated their energy use before most. On average, this means those towards the top of their band will pay less than before. 

Non-half hourly customers and small usage half hourly customers 

Banding is based on annual consumption, which you can see below. Meter points were allocated to a band based on their recent annual consumption as of August 2020, and in most cases will stay on this band for a number of years even if their consumption changes. This means your current consumption may not necessarily match your current band.  

Band

Annual Usage  (kWh) 

1

0-3571 

2

3572-12553 

3

12554-25279 

4

25280+   

 

Large usage half-hourly customers 

If there is an availability charge on your energy bill, this will mean you are in the large usage pot. Banding is based on your agreed supply capacity with the Distribution Network Operator, which we’ve added below.  

Band  

Low Voltage (kVA)

High Voltage (kVA)

Extra High Voltage (kVA)

1

0-80 

0-422 

0-5000 

2

81-150 

423-1000 

5001-12000 

3

151-231 

1001-1800 

12001-21500 

4

232+ 

1801+ 

21500+ 

  

Do I pay TCR banding already? 

If you signed up for a fixed contract after April 2022, it may have been implemented into the pricing of your contract. If you’re currently on a deemed contract, these changes would have been factored into your price.  

If you’re signing up for a new contract or planning to renew, your new rates will include these changes.