Following on from our blog post a few weeks ago regarding pass through rates, UK energy regulator Ofgem are carrying out a targeted charging review (TCR) on some of the non-energy costs found on your utility bill. These two costs, which assist in the maintenance of the UK’s electricity network, are the transmission charge (TNUoS) and the distribution charge (DUoS).
In a hope to create a fairer charging system, Ofgem are changing how businesses are charged these extra rates, therefore, similar sized energy users will pay similar TNUoS and DUoS fees. Currently these extra fees are split into two, residual, covering the cost of maintaining the electricity network and forward looking, the price of future expansion of the network. The current TCR will only affect the residual charge, which currently comprises 90% of the TNUoS fee and 50% of the DUoS.
Therefore, from April 2022, the residual charge will no longer be built into a business unit rate, rather the supplier will be charged a fixed amount. To combat this, some energy suppliers have stated that the new fixed charge will be implemented into the standing charge. Therefore, it will appear that the standing charge will be increasing, however, the overall unit rates will be decreasing.
This scheme is hoping that similar sized businesses will have the same fixed residual charge from April 2022.
If your business has started a contract before April 2022 but will proceed assed the month, the charge will come into effect and your utility bill will change, however, the way in which your supplier implements the new charge should be stated before the changeover.