The Department for the Environment and Climate Change (DECC) has issued a second consultation on improvements to the electricity grid, following on from a first round of consultation in August-November 2009 (see our e-update of 29/10/09). After taking into consideration responses to that first consultation, the DECC are now consulting on the detail of their selected preferred model and its implementation.

The selected preferred model is the Connect and Manage (Socialised) model. The Socialised model fully socialises any additional constraint costs. Under these arrangements costs will be shared between all users of the network and will ultimately be borne by consumers.

This model appears to have been chosen because it is consistent with the current treatment of constraint costs, an already well understood model which the DECC thinks will enable the greatest investment in electricity generation. The DECC has subjected the model to economic analysis, which has shown that the model would meet renewable energy targets without excessive additional costs.

The proposal is that the model will be implemented through the amendment of industry codes and network companies’ licences. Proposed amendments are set out in detail in the consultation document. It is proposed that the key features of the new regime will be embedded as a Public Service Obligation on transmission licence holders by insertion of a new standard licence condition within the transmission licence. The consultation paper can be found by clicking here. Comments are invited by 31 March 2010. It is still the intention that the model will be implemented by June 2010.