The UK Targeted Charging Review (TCR)

…More complexity on our energy bills

In April 2022 we will see yet another complex introduction to our billing especially if you own a property that has a profile of 00’. In true OFGEM fashion they have created a name for this scheme that does not mean anything. To me it just creates more confusion. In the last few months we have already been witnessing not just customer confusion, but ‘brokers’ and ‘suppliers’ either not being clear or not understanding the process. Renewals have been presented with this missing, whilst overall the organisation will be the one that suffers when they receive their bills containing these extra costs.  

I want to use this article today to try and explain what the TCR actually means. Your energy bills do not actually reflect the cost of energy alone (this is known as the wholesale price) it is also subjected to the non-commodity chargs. The non- commodity actually reflects a very high percentage of the overall energy cost. Broken down, the non-commodity actually covers all associated costs and investments required to obtain the energy from the power station and then to the meter in your building. Some of these costs are connected to transmission and distribution (TNUoS and DUoS). 

At each stage we, the energy bill payer, have to contribute to these costs. These costs cover installation, maintenance and upgrades. Currently based on your energy consumptions, your liabilities for these costs are subject to how much energy you actually use and the larger users are subjected to ‘traffic light areas’ red, yellow and green where they are penalised if they use energy at the wrong time of the day. 

This new scheme will cover a different methodology and everyone will receive a ‘fixed’ cost based on the size of your profile and where your property is. This different approach means that now there will be some winners and losers. The smaller profiles that very seldom breach the 'red' will now be penalised because they have to contribute more. The winners will be the organisations that constantly breach these areas but will not be affected too much. 

In my personal opinion this is not a fair way of addressing these costs and from a point of view regarding driving energy consumption down, a far better approach really does need to take place. We as consumers simply accept costs. If a consumer uses more energy, they are then prepared to meet those costs because that is the way of business. We are however, just fuelling the costs of transmission and distribution, which is continually under the threat of stability issues. I really do understand the need to invest in our infrastructure but we also do need to provide incentives in order to drive energy down. Therefore a balance is needed. 

The TCR process appears to be yet another “stick” for the organisation highlighting the need for more money for transmission and distribution. For the UK however to meet its net zero targets of 2050, we really need to address a ‘carrot’ here. 

Currently, as an Energy Manager I know that every kWh I save my clients impacts their bill as the energy bill is predominantly based on consumption. When we move the costs from variable to fixed, the incentives to review, realign, reduce and report actually dilutes and possibly disappears. You can’t even beat this cost by putting technology behind the meter because there will always be the ‘Standing Charge’. 

The underlying issue now is that an energy projects payback will now slightly increase and we will need to work significantly harder to actually address this, regarding providing more value for money. 

Every cloud does have a silver lining though and on thinking about this over the weekend I honestly feel that we can address this predicament that we find ourselves in. 

My solution for this is as follows:

1. Engage with an energy expert who has a complete understanding of both the commodity and non-commodity costs. Develop a good relationship with them to provide an open book strategy regarding all the costs from the supplier (This is actually possible).

2. Purchase your energy in advance and within plenty of time of the contract renewal, ensuring you do not leave it to last minute price hikes (I have seen this happen so many times when organisations don’t have contracts and suppliers are just rubbing their hands together).

3. Engage with an Energy Expert to drive down consumptions and try and balance off these new costs. 

4. Ensure that all the legislation is up to date regarding ESOS and SECR, both these legislative processes will keep the costs down. More about these in future articles.

B2B Energy works with experts within these areas and we find that when working with organisations to deliver this process the savings are identified and maintained. The prize for delivery ( points 1 – 4 ) will make a significant impact on your ‘3rd largest expense. I have seen this many times and it is the right thing to do to stay in front of such reviews.

If you enjoyed reading this article or want to provide feedback, please contact Paul Webb at www.b2benergy.co.uk or send him a direct message. He will respond within 24 Hours

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Copyright ?Paul Webb 2021

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?B2B Energy 2021