Understanding Your Energy Bills: Capacity Charges

TCR Banding: A Powerful but Overlooked Way to Lower Energy Costs for UK Businesses As UK business energy prices continue to fluctuate at historically high levels, companies across the country are under increasing pressure to find reliable ways to lower energy costs. With government levies, non-commodity charges, and market instability all contributing to rising bills, businesses must now look beyond traditional energy-saving methods to manage their expenses. In previous articles we looked at how to lower kVA charges , and published a guide on how to lower business energy costs . One such method gaining attention is TCR Banding — a relatively lesser-known, yet impactful solution for reducing DUoS and TUoS charges. What Is TCR Banding? TCR Banding is part of the Targeted Charging Review (TCR) , a reform introduced by Ofgem in 2022. Its goal is to ensure a fairer, more consistent system for charging UK electricity users for their share of the grid's maintenance costs — specifically the Transmission Use of System (TUoS) and Distribution Use of System (DUoS) charges. Instead of charges being based on when energy is used (which could be manipulated by large users), charges are now fixed and based on how much energy is typically consumed. This is where TCR Bands come into play. What Are TCR Bands? TCR Bands categorize electricity meters into different levels based on their voltage type and agreed kVA capacity. These bands determine the fixed DUoS and TUoS charges applied to a business's energy bill. For Low Voltage (LV) Half-Hourly Meters: Band 1: 0 – 80 kVA Band 2: 81 – 150 kVA Band 3: 151 – 231 kVA Band 4: 232 kVA and above For High Voltage (HV) Half-Hourly Meters: Band 1: 0 – 422 kVA Band 2: 423 – 1,000 kVA Band 3: 1,001 – 1,800 kVA Band 4: 1,801 kVA and above The higher your TCR band, the more you'll pay in fixed DUoS and TUoS charges — making it essential for UK businesses to ensure their banding is correctly assigned. Who Assigns Your TCR Band? Your Distribution Network Operator (DNO) is responsible for assigning your TCR Band. DNOs are regional companies that manage the physical infrastructure delivering electricity to your site. They’re also the ones compensated through DUoS and TUoS charges shown on your business energy invoice.

March 2025 Review By Adam Novakovic As we exit the winter season and the weather begins to improve, the energy news has – once again -- been dominated by the conflict between Russia and Ukraine.

February Review By Adam Novakovic With consumer spending declining and OFGEM raising their price cap, you would be forgiven for seeing February as a month where negative news was at the forefront, but in the energy markets, this was not the case.

January 2025 Review By Adam Novakovic This January saw the UK record it’s coldest night in 15 years, but there wasn’t much in the way of wind to accompany the cold temperatures of the month. This combination led to more energy being used than expected and lower-than-hoped renewable levels being recorded, as energy prices continued to rise against the backdrop of European gas reserve levels being depleted. January kicked off with the long-expected news that Russian gas supply would cease flowing into continental Europe. Whilst the cessation of this supply had been long planned for, many would have hoped it wouldn’t coincide with a cold snap hitting the continent. The lower-than-expected temperatures have led to energy consumption being higher than anticipated putting a further strain on reserve supplies. While the weather forecasts were making for dim reading, there was some positive news coming from across the Atlantic. Donald Trump -- uncharacteristically for a politician -- had followed through on his pre-election promises and lifted the freeze on US LNG exports. In addition to reallowing exports to be permitted, Trump has also allowed for new US LNG projects to be applied for, this boosts both short and long-term positivity surrounding the gas supply that can be received by Europe. With the cessation of the Russian gas supply occurring instantly from January 1 st , and the restarting of US exports being something that will likely take months before export capacity is fully ramped up, it could be a few months before the positive effects are truly felt. This would coincide with the end the European winter, so it may be the end of March or beginning of April until the market has a more positive response. However, this could also be when European nations look to begin restocking their reserves. For those with renewals in the coming 3 months, now may be the best time to seek prices, as the further depletion of European gas reserves is likely to have a negative impact upon prices. For those whose contract is due for renewal later in the year, it may be best to be patient and wait for the market conditions to change. If your contract is due for renewal later this year and you would like a reminder sent when the market conditions turn more favourable, simply email your contract end date to adam@seemoreenergy.co.uk and we will provide reminders ahead of the renewal, at times when the market is presenting favourable negotiation conditions. 

2024 Review By Adam Novakovic In a year that began with falling energy prices, there were recurring catalysts that led to prices climbing steadily higher. Geopolitical uncertainty and the perennial threat of escalating conflicts meant fear would maintain a constant presence in the wholesale markets. We will look back at the key energy stories from 2024, and how the energy markets are likely to shape up in 2025. Quarter 1 The year began with cautious optimism as the UK’s gas reserve levels were healthy and prices for the Summer’24 season were in freefall. In February, prices pulled back to their lowest levels since 2021, and for the first time in a while, we identified that there was greater potential for upside risk than for further downward price movement: “ there now (exists) an asymmetrical element of risk should the market encounter a supply-side problem of significance. ” During February we had advised customers on flexible contracts that this was an ideal time for making purchases. March would see prices begin to ascend again as international conflict would create problems with LNG imports, and we would highlight the geopolitical risks as an area for concern moving forwards: “ fears remain and there are potential negative catalysts that could lead to prices rising further, with the main factors to watch out for being based on geopolitical unrest. “ For a business that purchases their energy in advance, this quarter was the optimal time for purchasing during 2024. In February, electricity prices for Winter’25 were down to 7.75p/Kwh, and as low as 6.05p/Kwh for Summer’25. Winter’25 ended the year with prices above 11.1p/Kwh, with Summer’25 prices exceeding 9p/Kwh. For a company that uses 500,000Kwh of electricity per month, the difference between buying at the February low point compared to today’s prices would represent a yearly saving of over £200,000.

December Review By Adam Novakovic As we moved into the final month of 2024 it seemed as though Santa would be the one delivering positive news regarding energy prices. From the 1 st of December to the 16 th , wholesale gas prices fell by almost 20% and it seemed the overdue market correction was finally underway. However, the price movement for the remainder of the month was more grinch-like than anybody had hoped, as prices rose again, wiping out the decline we had seen in the first half of the month. There were 2 reasons for this rise in prices, the first reason being the weather. Initial long-term forecasts had not predicted this winter to be particularly cold, however, December saw erratic weather events and lower than anticipated temperatures. In October it had been predicted that UK gas consumption throughout the current winter would be very similar to the levels of last year. This now appears to be inaccurate as colder temperatures have led to increased consumption. European gas storage levels have dropped below 75% of capacity with the UK levels being around 55%. This does not compare favourably to last year and raises concerns of how prices could rise should there be a particularly cold January and February. Part of these concerns are already factored into the prices, but this is likely to be the largest short-term factor in energy prices.

November Review By Adam Novakovic

October Review By Adam Novakovic As we head into the winter months, gas prices and availability become a higher priority for many businesses and households. In this month’s review we’ll be looking at the factors set to dictate how gas prices move over the coming season. October started with fear in the energy markets as Iran launched retaliatory strikes against Israel. Worries of the conflict expanding have been a repetitive theme in energy markets for the past year and it seemed as though that was unlikely to change. The increased military activity had led to rising prices, however, as the month progressed, hopes of a possible ceasefire have increased with leadership on both sides signalling they may be willing to put an end to hostilities. How this plays out over the coming days and weeks could be a key factor in the stability of energy prices throughout the coming winter. Meteorological forecasts have now confirmed that the UK is likely to see a La Niña winter. La Niña weather patterns refer to cooling oceans and strong winds which will have an impact on British conditions. During La Niña winters it is more likely that the UK will see a cold start to winter, a milder end, and a wet Spring. A milder end to winter would bring relief and take any pressure of the gas reserves which are currently close to being 100% full. The current forecasts make it seem unlikely that a winter of sustained cold temperatures (when compared to historic averages) is forthcoming. A POWWR energy report released in October has shown that business energy spending is increasing with businesses using 4.1% more energy during the past quarter. Energy prices remain a key concern for many high-consuming industries. Since the end of February, prices have been steadily rising. The wholesale energy prices for gas on October 31 st were more than 80% higher than they were in late February. For a manufacturing business with a 3GWh summer consumption, the difference between purchasing next summer’s energy back in February compared to today, is a difference of approximately £350k.

September Review By Adam Novakovic September was a rollercoaster month for UK energy prices. In the wholesale market, prices dropped 20% from the start of the month through to the 19 th , only to then rise over the final 11 days of September -- undoing much of the previous work. In this article, we will review the factors behind these moves. As mentioned in previous months, the resumption of Norwegian gas production was always set to be a boost to the markets. At the start of the month, Norwegian supplies resumed. This, coupled with the healthy reserve levels, led the markets to believe concerns on the supply-side were overstated, and this caused prices to drop. There were some temporary increases in demand as the UK entered a cold snap a couple of weeks into September, but this was a minor speed bump in the path of the descending energy prices. One of the main fears surrounding energy supply is that no deal has yet been agreed to suitably replace the Russian gas that will cease being delivered when its contract terminates at the end of 2024. So, it was a big boost when news began to circulate that Ukraine and Azerbaijan had reached a deal where Ukraine would deliver Azerbaijani gas to mainland Europe. Prices continued to sink further as news spread, and this was seen as beneficial to the supply of gas throughout the continent. However, the Ukrainian news outlet that first broke the news was forced to issue a retraction as the Azerbaijani energy ministry denied the story and Ukrainian government sources clarified that no such deal was in place. This caused prices to rise sharply as the markets now had a renewed focus on the hole that may be left in the supply-side picture when Russia’s deal with Europe reaches its conclusion. A further catalyst for rising prices then came from the Middle East. While it appeared many Arab nations had been keen to pursue a peace deal, any hopes of conflicts subsiding quickly were ended with Israeli operations targeting Iran and Lebanon. It now seems inevitable that the conflict will spread and escalate during the coming months, and the shipping of LNG to Europe will almost certainly be impacted. Whilst it is impossible to accurately predict how geopolitical events will play out, this does seem likely to be a continued source of energy price rises for the foreseeable future. During September, it was revealed that the UK has the highest energy prices of all industrialised nations, more than double the per unit cost of Portugal and more than 3 times the cost of some Scandinavian nations. In not-unrelated news, OFGEM announced that UK energy debt has now reached £3.7bn, with energy debt having grown by 50% in the previous year. For many businesses, energy spend is an increasingly large concern that has no obvious solution. If you would like to discover ways to reduce your energy spend, or ensure you aren’t paying any more than necessary, visit www.seemoreenergy.co.uk or feel free to contact me at adam@seemoreenergy.co.uk . Outlook Even though the month has ended with sharply rising prices and growing fears surrounding energy supply, the outlook isn’t all doom and gloom. Initial long-term weather forecasts have shown that – while this winter may be colder than the previous year – it is anticipated to be milder than the average winter. With reserve levels looking healthy and Norwegian gas supply resumed, there doesn’t appear to be any need for fearmongering. While prices may be set to go higher on the news of further conflicts, there are reasons to be optimistic about the direction of energy prices beyond the coming winter. In 2025 we should see more LNG available to the market as new supplies (particularly in the US and Qatar) come online. And, whilst there may have been a false-start this month, any positive news regarding the replacing of Russian gas flows would also have the potential to significantly lower prices. If your business requires advice with its energy procurement, management, or planning, then don’t hesitate to contact Seemore Energy to speak to experienced advisors who can help you with bespoke strategies and advice that is tailored to your needs.