The draft Electricity (Connection Offer Expenses) Regulations 2018 (the “Regulations”) were published on 28 February 2018. The Regulations provide for distribution network operators (“DNOs”) to recover certain charges in relation to distribution connection offers, following the Consultation on Assessment and Design Fees issued on 21 September 2017 and the Government’s response in early February 2018.

Background

In accordance with the Electricity Act 1989, DNOs are legally obliged to provide a connection offer on request and, in doing so, incur assessment & design costs ("A&D Costs”).

Prior to the Regulations, DNOs were only permitted to recover the reasonably incurred costs of providing a connection offer from those applicants who accept a connection offer. Ofgem later published an Open Letter in support of this position.

Powers were subsequently included in the Energy Act 2008 whereby a DNO could recover from applicants reasonable expenses incurred in providing connection offers (i.e. A&D Costs), regardless of whether that offer was subsequently accepted. On 24 March 2016, the Government published a Call for Evidence to gather stakeholder views on A&D Costs. The majority of respondents favoured allowing DNOs to charge A&D Costs, even where there has been no subsequent acceptance by the applicant of an offer.

Regulations

The Regulations make provision for DNOs to charge for the cost of providing an electricity connection offer whether or not that connection offer is accepted. The Regulations set out the kind of expenses which may be charged by the DNO and the requisite notifications to be sent to an applicant before such expenses may be charged. The following is a summary of the expenses and notification requirements as defined therein:

  • A DNO may require the applicant to pay expenses reasonably incurred by the DNO in doing any of the following:
    • assessing the impact of the connection on the distribution system;
    • assessing the impact of the connection on the transmission system;
    • designing the connection; and
    • processing the application.
  • For the DNO to receive expenses they must give notice to the applicant, requiring the payment of such expenses outlined in the notice. The notice to the applicant must;
    • specify the amount to be paid to the applicant;
    • give the applicant sufficient information to understand how such amount has been determined;
    • specify when and how payment must be made; and
    • include a statement to the effect of section 23 of the Electricity Act 1989.

Next Steps

The Regulations will come into force on 6 April 2018 at which time DNOs will be able to charge A&D fees to connection applicants, irrespective of whether they accept the subsequent connection offer. This will apply only to applications made on or after the 6 April 2018.

Further, Ofgem intends to consult, in due course, on changes to Standard Licence Condition 12 to allow DNOs to require the payment of A&D Costs as a precondition for providing a connection offer.