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 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 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 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.