A significant code review
In August 2017, Ofgem launched a Significant Code Review (SCR) called the Targeted Charging Review (TCR). It was launched to address Ofgem’s concern that the current framework for residual and cost-recovery charging may result in inefficient use of the networks and unfair outcomes for consumers.
The Targeted Charging Review has looked at how electricity network residual charges should be set, for both transmission and distribution.
It has also looked at the differences in charging arrangements between transmission connected generators and smaller distribution connected generators (Embedded Benefits).
The principles Ofgem used to assess potential changes were:
1. reducing distortions
2. fairness
3. proportionality and practical considerations
Ofgem's Final Decision
Ofgem published its final TCR decision on 21st November 2019. The decision document can be accessed on Ofgem’s website.
There are two key areas for reform:
> Residual Charges
> Embedded Benefits
The changes will be implemented in stages, with reforms at transmission level being introduced in April 2022 and at the distribution level in April 2022.
A Second Balancing Services Task Force has commenced following Ofgem’s TCR decision. More information can be found here.
Please go to our Summary Note for more information on what changes will take place as a result of Ofgem’s decision.
Further information on the TCR can be found on our TCR resources page