- Typical Domestic Consumption Values (TDCVs) are used in the energy industry to provide a method to easily compare figures on energy usage.
- They are calculated using historical data across a range of meter types and energy consumption levels and aim to give average use for a typical household.
- From the 1st of October 2023, TDCVs will be updated to reflect the observed decrease in average annual energy consumption across homes in the UK.
- This will affect direct comparisons between energy bills between this year and last year, and customers should be aware of the change in TDCV when comparing price cap figures.
What is a Typical Domestic Consumption Value (TDCV)?
TDCVs are industry standard values for the annual gas and electricity usage for a “typical” domestic household. They are calculated by Ofgem, the energy regulator, using historical data and cover different meter types, and high, medium or low energy usage. TDCVs are needed to provide a common basis for comparing energy prices across suppliers, regions and over time.
TDCVs are used in the quarterly publication of the price cap updates. They can also be used by suppliers and price comparison websites to calculate estimations in the absence of individual customer data.
What is the Price Cap and what does the figure announced by Ofgem mean?
The Domestic Gas and Electricity (Tariff Cap) Act was introduced in 2018 and requires Ofgem to design and implement a standard tariff cap. The Price Cap sets a maximum amount that suppliers can charge per unit of energy for customers on default tariffs, as well as a limit on the daily standing charge that customers must pay if they are connected to the grid.
For simplicity, and to give customers an idea of how much a yearly bill might be as opposed to cost per kWh, when the Price Cap is announced the headline figure is normally based on an “average” dual fuel (gas and electricity) household paying by direct debit that has typical consumption. This enables a yearly figure to be quoted, although people’s bills will vary depending on where they live, how they pay and how much energy they use.
A Price Cap of £2,000 means a household whose energy usage was in line with the TDCVs of 12,000kWh of gas and 2,900kWh of electricity per year would pay £2000 if prices remained at the Price Cap level for the full year, but as above – actual energy bills will vary depending on multiple factors.
How will TDCVs change?
There has been an observed decrease in average annual consumption across typical households, and from the 1st of October 2023, TDCVs will be updated to reflect this. There may be several reasons for this including warmer weather and increased energy efficiency, as well as people using less energy as a response to higher energy bills. Ofgem will be using data from 2019 and 2021 to calculate TDCVs, instead of 2020 and 2021 due to the exceptional circumstances of the Covid-19 pandemic.
What does this mean for my energy bill?
The Price Cap will continue to set the maximum amount that suppliers can charge per unit of energy for customers on default tariffs, and changes to TDCVs will not affect this.
The reduction in TDCVs means that when comparing future price cap announcements with previous figures, it may appear that the cost of an average bill is lower when in fact it is because the typical energy consumption on which the annual figure is based has been reduced. Customers should consider the reduction in TDCVs when comparing or using this calculation to estimate cost, and where possible are advised to use their own annual consumption figures, which can be found on energy bills, as well as using the actual unit rate cost, for the purposes of comparing suppliers or estimating bills.
More information on TDCVs can be found here, including a table of updated values.
Figure 1: Impact of changing TDCVs on headline Price Cap