Ofgem has upheld a proposal from National Grid to delay the Targeted Charging Review (TCR) by 12-months, pushing back its implementation to April ’22. The official reasoning behind the decision is that it is due to supplier concerns of insufficient notice.
The proposed changes will shift the way that electricity transportation costs are charged from being based on winter consumption to a capacity-driven standing charge. Although the objectives of the review are sound, there have been concerns that the implementation in April ‘21 would mean suppliers will have to open up existing contracts and pass-through additional costs.
Although moving the date back doesn’t remove the problem completely, it does mean that suppliers and businesses can take the issue into account when agreeing future contracts and setting future budgets.
As things stand, the changes to transportation costs will now be introduced at the same time as the already scheduled changes in distribution network costs in April ’22. Given the significant re-weighting of costs that will ensue from the dual application of these code changes, some suppliers have expressed reluctance to price fixed contracts beyond this date. In addition, any business locking in a fixed price contract beyond this date should be aware that there is some cost uncertainty beyond this point, and future reconciliations are very likely. However, with the wholesale markets at multi-year lows this should not be a deciding factor in seeking to secure long-term electricity and gas supply contracts.
Carbonxgen will continue to monitor the situation and engage with suppliers in order to ensure that customers are updated with the latest news on the TCR. It is expected that a clearer picture and hopefully a schedule of charges will be available by the end of 2020.