Ofgem’s Targeted Charging Review

Pass through charges and Ofgem’s Targeted Charging Review 

In April 2022, Ofgem (the energy regulator) reviewed the way that electricity bills were calculated as part of their Target Charging Review (TCR). This is because the costs of maintaining the country’s electricity infrastructure is increasing, but those costs are passed on to an increasingly smaller number of electricity users, making their charges disproportionately high.

Ofgem’s TCR wanted to improve fairness while making sure the electricity infrastructure we need to keep your business running, is working the way it should. So, they decided to change the way electricity users are billed for electricity.

What was the change? 

Traditionally, electricity customers have paid a unit rate for usage. A proportion of this unit rate contributes to the operation, maintenance and improvement of the infrastructure, and the transmission (TNUoS) and distribution (DUoS) of electricity. These costs are split into two parts:

• residual charges (the cost of moving electricity through pylons and cables); and
• forward-looking charges (the cost of improving the infrastructure).

Residual charges will now be charged through a daily charge either as part of, or alongside, your traditional standing charge (depending on your contract) instead of unit rates. This is so energy users pay for the transmission and distribution of energy charges proportionately.

When did this come into effect? 

The TCR changes came into effect for distribution charges from 1 April 2022, and from 1 April 2023 for transmission charges.

What does this mean for you? 

Your business will be banded according to how much electricity your business consumes. This will determine the amount you pay for transmission and distribution charges. Your charging band is set by National Grid.

• If you were in a fixed term electricity contract before this change came into effect, your charges will stay the same.

• If you are out of contract, on a deemed contract, or your contract has rolled over, pass-through amounts will apply.
• If you enter into a new contract/renewal with us, you can choose whether to enter into a fixed tariff or a pass-through tariff.

• On a fixed tariff, your standing charge will be slightly higher but will remain the same as we build in pass-through amounts as an average, giving you peace of mind.

• On a pass-through tariff, your standing charge will be lower but we’ll pass-through transmission and distribution charges at cost. This means that your daily charges may fluctuate, but you pay the pass-through amounts at the exact rate we’re charged as a supplier.

For more information, please see the terms and conditions of your contract.

Transmission and distribution costs vary by Distribution Network Operator (DNO). You can find your DNO region on the National Grid website.

Pass through charges FAQs

Where can I see this on my bill?
We want to be transparent about our billing so you will be able to see the breakdown of these charges on your bill. We send your bill every month and if you are registered with Customer Zone, you can download a copy of your bill at any time.

How can I check which band I’m on? 

You can find more information about which band you’re on by visiting the National Grid website

I think I’m in the wrong band. What should I do? 

You may be able to change this by discussing it with your DNO.

Are other suppliers doing this too? 

The TCR is an industry wide change which impacts all suppliers .

Where can I find out more information about the TCR?

More information about the TCR changes can be found on Ofgem’s website.

Limits refer to annual consumption

Where can I find out more information?

More information regarding the TCR changes can be found on Ofgem’s website: Targeted Charging Review: Decision and Impact Assessment | Ofgem