How will DCP 228 affect business energy?
What is DCP 228?
DCP 228 is the term given to an upcoming regulatory change to the way electricity distribution charges are calculated. Currently in the pipeline for next year, this new change is coming from OFGEM and will significantly change the way the majority of businesses are charged for the electricity that they use.
DCP 228 will affect the way both domestic and business properties are billed with changes being made to how distribution charges are calculated (these currently account for as much as 19% of a customer’s bill). It will be brought in by OFGEM no earlier than April 2018 following a consultation period after being instigated by British Gas. The changes affect Common Distribution Charging Methodology (CDCM) and how customer tariffs are set.
The main distribution charge is the DUoS (Distribution Use of System) which correlates to usage and is calculated using a Red, Amber and Green banding system.
At the moment, the system means that a large percentage of revenue comes from premium pricing on the red time band – which is mainly based on evening usage. However, DCP 228 will balance out DUoS bandings which will mean less focus on Red, Amber and Green period differences which is thought to make pricing fairer and more accurate.
How will DCP 288 affect business?
According to OFGEM, DCP 228 will ‘have large impacts on all customers’ and its working group estimates that whilst some customers will see an increase in distribution costs, others will see significant decreases. However, the modification to CDCM will not affect those whose charges are calculated under the Extra High Voltage Distribution Charging Methodology, such as the UK’s larger electricity connections.
Ofgem states that “the general pattern is that distribution charges for domestic customers will fall, but those for non-domestic customers will increase”.
In term of geographical location, DCP 228 will differ according to region because it is the Distribution Network Operators that will determine the charges within their area. To identify your business’s DNO – click here. In the most part, it is estimated that Red band unit rates will fall – but Green and Amber will rise.
The changes are effectively flattening the DUoS pricing structure to make consumption timings fairer – though evening usage is widely believed to continue to be the most expensive pricing bracket for businesses.
Ultimately, there will be winners and losers when these changes come into fruition. Those who have high usage within Red band should see some decreases to their rates, whereas businesses with predominantly Green and Amber bandings may well see prices rise.
How can businesses mitigate the impact of DCP 228?
Because the changes apply to Common Distribution Charging Methodology, there isn’t much a business can do to avoid alterations in the way energy is being priced. However, there are ways that you can manage the times in which you use energy more effectively to avoid expensive periods.
Investing in management software can enable you to monitor when your business is using the most energy so that steps can be made to reduce consumption when tariff rates are at their highest.