Targeted Charging Review (TCR)

What is it?

TCR is an initiative from Ofgem that changes the way Distribution (DUoS) and Transmission (TNUoS) costs are recovered. The costs are made up of two parts 1) residual, which covers the costs of the day-to-day running of the electricity networks and 2) forward looking, which covers the expansion and future proofing of the network.

Currently the residual costs are built into the unit rate (p/kWh) but once TCR comes into effect, the costs will move to the standing charge (p/day).

The size of the standing charge is determined by the Line Loss Factor code, with larger sites paying a larger rate.

Why is it changing?

Historically, larger energy users have used sophisticated technology or on-site generation to reduce the amount of electricity they draw from the network during the high cost periods. Unfortunately, the cost they avoided was then passed onto smaller users who could not shift their consumption. TCR seeks to address the unfairness that had developed under the previous charging mechanism.

How does that impact businesses?

Businesses will see their standing charges increase, but there will also be a reduction to the unit rate. Overall, the distribution and transmission companies will still seek to recover the same amount of revenue they were allowed under the old charging mechanism.

When will it come into effect?

From April 2022, DUoS will change its charging methodology to conform to TCR, with TNUoS happening a year later in April 2023.