Ofgem published its review paper on competition in gas and electricity connections on 16 February following a connections review initiated last May. It reports on the regulator's findings regarding the state of competition in this area and also makes suggestions for improving competition. Responses to the review are invited before 30 March.
The review paper is relatively complementary of the state of competition in the gas sector and finds that the gas connections market has developed steadily with Independent Gas Transporters offering an alternative to host Gas Distribution Networks for housing developers looking for connection to the gas network. It does not propose any changes to this area in the current review.
Electricity connections do not fare so favourably in the regulator's assessment. Ofgem notes a number of problem areas and proposes wide-ranging reforms in order to promote competition in this area. Broadly it is proposing measures which will increase the ability of customers to note differences in price and service between competing providers. It also advocates increased regulation in areas where competition cannot flourish and, ultimately, the extension of the areas of work in which competition is permitted.
Of particular note:
- Proposal to introduce standard levels of service as a formal licence condition for Distribution Network Operators (DNOs) and Independent Distribution Network Operators (IDNOs) regarding provision of point of connection information, approving or rejecting design proposals and completing final connections. Standards currently exist but are purely voluntary;
- Proposal that all DNOs standardise certain key messages through plain English documents, helping customers to make an informed choice between them; Proposal that all DNOs should break down their costs clearly in their quotations to enable easy comparison by customers between competitors;
- Proposal to extend the scope of contestable works in medium term. Currently there a limited number of "contestable activities" that can be carried out by a DNO or Independent Connections Provider (ICP) with the remaining "non-contestable" areas of connection only able to be carried out by the host DNO. Ofgem recognises that contestability should be extended, especially to overhead lines, but that competition in currently contestable areas should be improved first;
- Ofgem recognises that in some areas, such as one-off domestic connections, ICPs are not interested in competing since the work is not lucrative. In such areas, Ofgem proposes increased regulation; and
- Proposal that DNOs introduce customer satisfaction surveys. Ofgem will reinforce this by monitoring DNO performance in key areas over the next 18 months.