Citizens Advice response to Ofgem consultation: Targeted charging review: minded to decision and draft impact assessment
In summary:
It’s the right thing to do : Ofgem is right to address the issues with the residual network charge. Distortions are likely to worsen as more users are able to avoid network charges through installing on-site generation. This puts an increasing burden of costs on users who are unable to take actions to reduce their network usage. Residual charges should not send signals to users to change behaviours.
We don’t have the whole picture : the full impact on consumers and micro-businesses is unclear with ongoing RIIO2 negotiations and the Access and Forward-Looking Charges SCR. In Ofgem’s proposals for the TCR some consumers will be better off and some will lose out. We have particular concerns on the impact of non-domestic micro-businesses consumers who might see residual charges increase by 800%.
Dual-rate meter consumers (Economy 7) should not face a different residual charge to single rate meter consumers. Residual charges should reflect the assets which the network user needs reflecting maximum capacity and not the volume of energy used.
Our preferred option is the Agreed/Deemed Capacity Charge model which, on balance, seems preferable to the Fixed Charge model.
We support the reform of Embedded Benefits which provide perverse investment signals to embedded generators.
Ofgem need to make decisions at the right time : The Access and Forward-Looking Charge SCR needs to develop further before decisions are made on the TCR. An aim of this work should be to achieve an enduring solution to paying for network costs which is fit for the future. Work underway in other workstreams might have consequential impacts to the TCR proposals.