Ofgem delays controversial network charge overhaul

Ofgem has deferred plans to rebalance transmission charging across the country by two years to consult on new analysis, it announced on Friday.

The regulator is still “minded to” go ahead with proposals that would close the gap between high charges to access the transmission grid in Scotland and lower ones down South. However, it will not now bring in the new system until April 2016.

This latest delay marks a minor victory for Npower, which has criticised the changes as a “hidden subsidy” for Scottish renewables. However, it is a blow to those such as SSE, who argue the current system is unfair.

Npower commissioned research from consultancy Nera, which last month concluded Ofgem’s preferred option would add £9 a year to a typical household bill. That is because the changes reduce the incentive to build power generation sources near centres of demand.

That challenged Ofgem’s claim the move would add just £1.60 to annual bills between now and 2020 and save them £8.30 a year from 2020 to 2030, because it encouraged siting of windfarms in windier locations.

While the regulator stands by its earlier conclusion, Npower’s intervention prompted Ofgem to update its modelling. Ofgem now proposes to consult on the latest analysis this spring and reach a final decision “as soon as possible thereafter”, pushing back the start date to April 2016.

Martin Crouch, senior partner at Ofgem, explained in a letter to stakeholders: “We consider that it is important to allow generators to respond to any change within the notification period required by the user commitment arrangements, and to give suppliers sufficient lead time ahead of implementation to avoid them building risk premiums in future for fixed tariff offers to consumers. We consider these issues are important in order to protect the interests of consumers.”

It is the latest in a string of delays for the review of charges, named Project Transmit, which has divided the industry since its inception in September 2010.

Jenny Hogan, director of policy at Scottish Renewables, said: “We’re pleased that Ofgem remains committed to reducing the gulf in transmission charges for projects on the Scottish mainland compared to those south of the border.

“However, the industry will be disappointed that this proposal will not now be implemented until April 2016 – two years after the new system was meant to come into effect.”