As of April 2018, there will be a major change to how the majority of businesses are charged for their electricity use.
DCP 228 – the name of the upcoming regulatory change brought in by OFGEM – will see a modification to the way electricity distribution charges are calculated.
At present, Distribution Use of System (DUoS) costs are at their highest for half-hourly consumers during late afternoon – or the so-called ‘Red Band’ – meaning a large percentage of distribution company revenue comes from premium pricing in this period.
The consensus is that costs need to be spread more equally throughout the day, leading OFGEM to strike more of a balance between the DUoS bandings (Red, Amber, and Green).
Through the introduction of DCP 228, this will make pricing “fairer and more accurate”, the gas and electricity market regulator says.
What does this mean for businesses?
In simple terms, DCP 228 will enforce a reduction of charges in red zones while amber and green will make up the difference and see marked increases. This means that most business customers will see a rise in costs.
As OFGEM states, “the general pattern is that distribution charges for domestic customers will fall, but those for non-domestic customers will increase.”
Ultimately, business which have high usage within Red band could see some decreases to their rates, though businesses with mainly Green and Amber bandings will likely see prices rise.
With costs determined by local Distribution Network Operators (DNOs), they will also very from region to region.
What can businesses do to mitigate these cost increases?
As changes apply to Common Distribution Charging Methodology, business can do little to avoid alterations in how energy is priced.
However, there are ways that you can manage the times in which you use energy more effectively to avoid expensive periods, as well as making certain other contractual and operational amendments.
How can we help?
The changes brought in by DCP 228 will increase the need to understand and control your energy usage – something we can assist with through our expert procurement, bureau and energy management services.
By performing a review of your contract and identifying how much risk your business is exposed to, we can optimise your situation to safeguard against any potential negative cost impacts.
For instance, if you have high and consistently flat baseloads at all hours of the day, DCP228 will likely end up costing you more, meaning you’ll need to secure a contract that reduces your exposure.
On the other hand, if your business has greater flexibility, there are other changes you can make to realise maximum benefit.
Through obtaining improved contractual terms, we can ensure that certain elements of your bill, including DuoS, are passed through at cost. Then, working closely with your business to develop an energy management strategy, we’ll identify at what times of day your energy-usage is most cost effective.
The final piece of the puzzle can be set in place by working with a reliable bureau provider. In helping you budget for future uncertainties and validating your more complex pass-through invoices, we’ll guarantee you never overpay for your energy costs.
For more information on how we can help your business prepare for DCP 228, contact us on on 02920 739 540 or email us and we'll get back to you.