As the way we use gas and electricity changes, the infrastructure that transports the energy to our businesses has to keep up to speed.

Target Charging Review (TCR) is a means of ensuring that all businesses pay a fair amount for the electricity they use.

Not sure what the TCR is and how it will affect your business? Here’s everything you need to know.

What is Target Charging Review?

When we pay our energy bills, a small proportion goes to the National Grid through our energy supplier.

This covers the upkeep of the energy infrastructure, costs to transport energy to our businesses, as well as balancing services – this ensures the National Grid has enough power to meet demand.

In the past, the amount businesses paid was determined by how much energy they used at peak times.

However, some businesses started to game the system by using energy outside of peak hours, meaning they paid less. As a result, other businesses had to pay more to ensure the National Grid kept on running.

TCR was initially proposed by Ofgem in 2017 as a way of making sure all businesses paid their fair share.

How Does TCR Work?

Before TCR, costs were calculated based on how much energy a business used at the busiest times of the day.

With TCR, costs are calculated based on a business’ capacity for energy use, or Available Supply Capacity (ASC) instead – measured in kilo-volt-amperes (kVA).

Businesses are placed into bands based on their ASC and pay a fixed rate.

Two key elements make up the costs which go to the National Grid.

Distribution Use of System (DUoS) Charges. These costs go towards maintaining the local electricity distribution network – changes came into effect in April 2022

Transmission Network Use of System (TNUoS) Charges. These costs cover the maintenance and repair of the transmission system – changes came into effect in April 2023

It’s important to note that the way each energy supplier passes on these charges will vary. Ofgem plans to review and revise bands and costs in 2026, so the costs you pay may change in the future.

The band you are in and the charges you pay are generally not broken down on your energy bill, but your energy supplier will be happy to provide you with more information if you need it.

Which Businesses Are Affected?

Some businesses have seen a reduction in costs due to the TCR, while others have seen an increase.

The businesses that have seen the biggest increases are larger businesses that use energy outside of peak hours – as they can no longer manipulate their energy use to save costs.

Other businesses are seeing a rise in energy costs too. For example, businesses that change the use of their building or introduce new infrastructure like EV charging points, could be reclassified under a new, more expensive tariff.

Alternatively, if you move into a smaller, more efficient building, you may be paying more than you have to, as your energy suppliers will use your previous data to determine your rates.

Can I Do Anything to Reduce Costs?

As the charges you pay under TCR are determined by your ASC and not the energy you use, reducing your energy consumption won’t affect how much you pay the National Grid.

(Although reducing your energy consumption will lower your bills overall.)

However, it might be that your ASC is higher than you need it to be. In this case, auditing it could potentially save you money.

We can carry out a no-obligation kVA analysis on your behalf. Our team will review your energy use and capacity and advise if you need to be placed in a lower band. We’ll then liaise with your energy supplier to reclassify your business and save you money.

Get in touch today to arrange your kVA analysis.