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Future network charges and access under review

18th December 2018

Ofgem has announced its decision to launch a Significant Code Review (SCR) into electricity network access and future charging arrangements.

The electricity network is undergoing a major transformation to accommodate smarter technology, new low carbon generation and storage, and new demand from electric vehicles. To ensure the regulation surround the networks is fit for purpose, the SCR will look into a wide range of areas, from the charges and access rights that generators pay to the capacity charges paid by consumers for using the system.

Inenco is concerned that the SCR is out of sync with the Targeted Charging Review (TCR) that Ofgem has almost concluded, which is likely to see the end of Triads. The two reviews could result in a lack of clarity and a longer transition period with changes to network charges implemented at different times.

To summarise the areas to be investigated, Ofgem will use the SCR to consider:

Forward Looking Charge Proposals

  • A wide-ranging review of DUoS charges – including a review of the balance between usage-based and capacity charges and improvements to signal how network costs vary by location;
  • A review of distribution charging boundaries;
  • A focused review of TNUoS charges including a review of distributed generator charges – despite the fact Ofgem’s Targeted Charging Review (TCR) has consulted upon this topic and is close to publishing its final decision.

Network Access Proposals

  • Access rights – including improved definition and choice of access rights for transmission and distribution connections; increased choice around time-profiled access; as well as a review of whether users should be allowed to share access rights and also whether short duration access rights should be available;
  • Consider whether new conditions are required – e.g. “Use-it-or-lose-it” to ensure that users don’t keep more capacity than they need (which would then free capacity for other users)

The SCR will lead to a consultation on proposals in Spring 2020 with a decision to follow later that year. Implementation of the resulting reforms can be expected between 2022 and 2023.

However, Ofgem has already consulted upon some areas of network charging in its Targeted Charging Review (you can read more about the TCR in our blog post here).

In response to the Significant Code Review plans published today, Inenco has issued the following statement, highlighting our concerns that the process is problematic:

A review of network access and charging is needed to ensure the UK is best prepared for a future, smarter network, however the process to achieve this is still far from clear. Ofgem is conducting two reviews of network charges that are entirely out of sync with each other and sending out conflicting messages. The Targeted Charging Review signalled the end of Triads and the introduction of fixed charges, yet the Significant Code Review announced today expects to reassess Triads and conduct a wider review of usage and capacity charges. The 18 month delay between SCR and TCR could lead to inaction from businesses, who are considering investment in demand management or are planning to build new facilities.

The two reviews need to be conducted simultaneously to ensure the full impact on consumers is clear and ensure a smooth transition, particularly ensuring any changes to TNUoS, DUoS and BSUoS charges are implemented at the same time. Delaying the final outcome of the TCR to align timescales would be far more preferable than three years of confusion with no clarity for system users.

– David Oliver, Technical Product and Insight Manager, Inenco