Ofgem slows work on longer-term network charging reforms

Ofgem has revealed it is slowing down the delivery of some longer-term policy work, including network charging and connections reform, so it can devote more resources to tackling the current energy crisis and protecting consumers over winter.

The regulator said network charging and connections reform will continue but will focus on implementing decisions that have already been taken.

“Where possible, we’ve moved teams from internal projects where the consumer benefit is not near term, meaning we have slowed down delivery of some longer term policy work,” Ofgem explained in an open letter to stakeholders.

“This includes aspects of network charging and connections reform, which we will look to resume in full as soon as we are able to.”

Ofgem said it has assessed which of this work to prioritise based on whether it does one or more of the following:

• Supports affordability for consumers, enhances market stability and resilience, or improves security of supply
• Relates to a significant code review (SCR) where it has already made its final decision
• Is required by law or relates to an ongoing legal matter
• Improves the efficiency or speed of connections to the electricity system in the near term

As such, the regulator said it will focus on:

• Continuing its work on reforming Balancing Services Use of System (BSUoS) charges, in particular whether they should be set in advance as flat volumetric charges
• Continuing changes related its SCR on residual network charges and embedded benefits – known as the Targeted Charging Review – to ensure its finding are applied to complex sites and are not undermined by a site’s connection configure or size
• Changes related to its SCR on network access arrangements to ensure the assumptions underpinning business planning by distribution network operators align with the requirements of the connection and charging regimes
• Ongoing work of the Transmission Network Use of System (TNUoS) charging task force, although no further task force meetings will be scheduled for the remainder of 2022
• Considering the core purpose of TNUoS charges in the long term in the context of the potential wholesale market reforms being explored as part of the government’s Review of Electricity Market Arrangements
• Near-term improvements to the processes underpinning electricity transmission connections, as well as distribution connections that impact the transmission network or require a grid supply point upgrade
• Assessing code modifications as they are raised in relation to the Offshore Transmission Network Review being conducted in partnership with the government

Ofgem said it is pausing work on its dedicated SCR on Distribution Use of System (DUoS) charges, which was spun off from the network access SCR.

It encouraged industry parties to consider whether any change proposals they might want to bring forward this winter are consistent with the prioritisation criteria it has set out and said code administrators have been asked to do the same when discussing any potential new changes with industry.

“We recognise that some stakeholders will be disappointed that we have deferred certain areas of work in the short term,” the regulator concluded.  “We consider each matter outlined in this letter to be important, whether Ofgem or industry-led.

“However, we must focus our attention where it provides most value for consumers and we consider the approach we are taking in light of the unprecedented market conditions faced by industry and consumers will achieve this.”