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Understanding tariff margins

Tariffs are normally designed to make target margins, on average, across broad customer bases over a number of weeks or months. However, there will be some times of the day - and days in a season - where energy curve prices and transportation costs are such that margins fall well below targets.

Understanding which customers are making margins and which customers are not, over different times of the days and seasons, is an involved process. It requires disaggregation of billed and settled energy volumes and application of a range of complex income and cost related tariffs.

At Engage, we understand billing and settlements in detail and know how these income and cost related tariffs operate. This allows us to determine for each customer (MPAN / MPRN) what the income and costs are in any period.

We determine these disaggregated values using our RAMA related tools and techniques and then undertake basic analytics on the results to fully understand the margin characteristics of different retail tariffs for different customer types over different time periods.

This allows suppliers to understand their tariffs in far more detail and to optimise these for different sub-sets of customers. This will become far more important as we move to smart metering: with more bespoke time of use tariffs and more direct allocation and settlement of energy in the periods it is used.