The Last Triad Period – How the Targeted Charging Review is Changing TNUoS Charges

Winter 2022/23 marked the last major Triad season for UK businesses. Since 1990, Triads – the three highest consumption peaks during winter – have been used to determine how much a business will be charged to cover the bulk of Transmission Network Use of System (TNUoS) charges.

What are Triads and how do they translate into TNUoS charges?

Triads are the three highest peak periods during November to February (with a 10 day gap before and after each peak). An exceptionally high £/KWh unit rate would be applied to those three half hour periods. Suppliers would predict what a business was expected to consume during these peak times and invoice accordingly throughout the year to build up a credit. When the official Triad periods are made public, suppliers reconcile these actual charges against the credit built by the customer. Any excess credit could then be credited back, and any shortfall would then be charged on the following invoice.

Why is the system changing?

The Triad system has been criticised for unfairly burdening some businesses while benefiting others. During Triad periods, businesses could adjust operations at peak times in an attempt to reduce transmission and distribution charges. This strategy allowed some businesses to avoid paying thousands of pounds in network charges, but the reality is that the transmission system needs funding and investment and this ‘zero sum game’ meant unit rates were then increased for businesses in future years to cover the balance required to maintain the transmission network. 

So, in order to create a fairer energy network and spread the cost across all energy consumers, Ofgem implemented recommendations from the Targeted Charging Review (TCR). In addition to promoting fairness, the changes under the TCR eliminates the need for large scale reconciliations and prevents businesses from being charged large sums of money twice when switching suppliers. The TCR has already changed the way BSUoS & DUoS charges are applied and this came into effect in April 2021 & 2022 respectively.

So how will TNUoS charges be calculated?

Starting on 1st April, 2023, there will be a fixed daily charge that will cover between 88% and 100% of the overall expected TNUoS costs (dependent on location). All businesses will be assigned a charging band based on their Authorised Supply Capacity (KVa), which in layman’s terms is their maximum demand for any half hour period. The band will determine the amount they will be charged daily.

It’s worth noting that, if your business is at the lower end of your given charging band, the fixed daily charges will be considerably more expensive than the band below. So, it might be worth understanding why your agreed supply capacity is that high, investigating whether it could be reduced, and appealing against the band that you have been placed in. This will be particularly relevant to businesses that have very occasional peaks in demand that would put them in a band with organisations using several times the overall amount of electricity and making their fixed daily charges far more than the previous DUoS and TNUoS charging methodology.

The remainder of the TNUoS charges will be recovered by using a unit rate approach based on the current Triad methodology but with much smaller rates applied to the three half hourly Triad periods. Notice the level of decrease in the unit rate for 2023/24 compared to 2022/23 in the table below, and the fact that zones 1-7 will have no charges at all applied to the Triad periods going forward. This huge reduction will impact the effectiveness of Triad avoidance strategies.

It’s also worth noting the ‘postcode lottery’, in the fact that businesses in Scotland, previously paid much less in TNUoS charges but will now be subject to the same maximum demand banding charges as businesses in the North West, Yorkshire, and the East Midlands. Businesses in these geographical areas may need to brace themselves for impact, but of course this all depends on the details of your individual situation. 

To figure out how the TCR will impact the way your business is charged for TNUoS, you need to couple the above table with your forecast half hourly demand for peak periods, with the non-locational maximum demand based charging bands to get your fixed daily cost. Add these together and you’ll know how much you are likely to be paying for TNUoS after the 1st of April 2023.

Real world examples.

To help explain how the previous Triad charging system and the new charging method differ, here are five simplified real world examples:

Can you change your charging band?

Businesses can apply to change their charging band by optimising their available supply capacity. By optimising the supply capacity businesses can then move down a charging band, and save thousands of pounds a year in charges. It’s not that simple though, as this maximum demand reduction would need to be evidenced to your District Network Operator (DNO) and changes might not be applied straight away, as the DNO could wait to apply the banding changes from the next window which will start on the 1st of April 2026.

Understanding how the TCR will impact your businesses energy costs is critical. The way TNUoS (& DUoS) is charged shifts away from time of use based charges to fixed daily charges. With this shift in the way charges are applied, the focus of your organisation needs to move too. Speak to one of our experts today to understand how the TCR will impact your business and how we can help you to optimise your position.

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