Ofgem consultation on electricity distribution price control

Ofgem consultation (138 pages, PDF plus 206 pages, PDF and more) on the review of electricity distribution price control due to take effect from 1 April 2010.

Ofgem proposes to remove revenue drivers based on units distributed and customer numbers from the price control formula, and to replace them with an extension of revenue drivers similar to the one used for distributed generation:

4.46. ... We intend to extend the use of capex drivers to demand related investment and associated indirect costs where we identify significant uncertainty. ...

4.47. ... We may flex general reinforcement expenditure allowances (i.e. expenditure on reinforcing the network due to general load growth which cannot be attributed to a specific customer) based on the increase in demand in MVA at highly loaded substations. We are also considering introducing triggers for high materiality projects. ...

Plans for comparative efficiency analysis are briefly outlined in Appendix 8, in the second file (206 pages, PDF). Ofgem's overview is:

4.81. We have been discussing our approach to the cost benchmarking with a number of academics as well as the DNOs and are looking to develop the range of techniques we are using in line with best practice for other regulators taking into account the availability of data. These techniques include corrected ordinary least squares (COLS) regression, panel data techniques, use of international data and Data Envelope Analysis. We will carry out benchmarking at both a top-down and more disaggregated level.

A discussion of possible changes to the information quality incentive (capital expenditure menu) appears in Appendix 9, in the second file (206 pages, PDF). This suggests some of the same ideas as the November 2008 update.

Responses by Friday 13 February 2009.

For further information or advice please contact Franck Latrémolière.

Filed under Electricity, Ofgem, Price controls.

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