Ofgem proposes to increase performance penalties for DCC

Ofgem has proposed to increase the potential penalties faced by the Data Communications Company (DCC) for poor performance.

The energy regulator previously consulted on revising the operational performance regime (OPR) to optimise the financial incentives placed on the company.

In a decision document published today (28 October), Ofgem confirmed it would be revising the framework after stakeholders raised concerns over the amount revenue at risk. It has published a further consultation setting out options to increase size of the incentive pot.

Under the OPR, DCC’s revenue is reduced if it performs below expected standards. The revenue currently at risk is equal to DCC’s baseline profit margin of around £7-£10 million per year. Ofgem has proposed to increase this amount to at least £10 million.

The regulator said its minded-to position is to apply the increase to all elements of the OPR, thereby strengthening the incentive for DCC to perform well across the board. It said this option would retain the present weighting between the three components of the OPR – 70 per cent for system performance and 15 per cent each for customer engagement and contract management. It expects to make a final decision in January next year.

Ofgem has additionally published another consultation on the DCC’s reported costs for the 2019/20 regulatory year.

It revealed total spending for the year of £495 million, or £463 million when excluding pass-through costs. The figure is up 14 per cent when compared to last year’s forecast, or 15 per cent with passthrough costs excluded.

Over the DCC’s full licence term (2013-2026), total costs (excluding pass-through costs) are now forecast to be £4 billion – 5 per cent greater than last year’s forecast.