Electricity distribution structure of charges: Ofgem decision

Ofgem proposals (74 pages, PDF) to direct electricity distribution network operators through new licence obligations (12 pages, scanned PDF) to implement specific methods for setting the structure of access charges to their networks.

The main proposals are:

The main missing elements are:

Companies have until Wednesday 29 October 2008 to decide whether to accept the licence obligations to implement these proposals. Unless three or more licence holders object (i.e. EDF or any two ownership groups), Ofgem has powers (presumably subject to judicial review) to impose the licence obligations without a Competition Commission inquiry.

Quick comment. The document contains (Appendix 3) some terms of reference for consultants. It seems that Ofgem would like DNOs to procure (and pay for) these services, but the terms of reference envisage most reporting to be to Ofgem. The document also says that Ofgem has “committed to help DNOs develop” some spreadsheets which seem to overlap with those specified in the terms of reference. All very strange. Message to the person in charge of procuring this work: Reckon is interested in making an offer. Contact Franck.

Update, November 2008. Proposals rejected.

For further information or advice please contact Franck Latrémolière.

Filed under Electricity, Ofgem.

Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.

About Reckon